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Tenancy Deposit Schemes
– a Storm in a (Chipped)
Tea Cup?
It is unarguably the
chief source of any
disputes arising between
landlords and their
tenants – the repayment
of tenants’ deposits.
But though such disputes
often arise over what
some outside observers
might regard at first
blush to be trivial
matters – a chipped tea
cup, a scratched chair
leg or a stain on a
kitchen table – they
have been taken
seriously enough by the
government to prompt the
proposed introduction of
tenancy deposit schemes
designed to take the
heat out of disputes
between warring parties
through recourse to a
dispute resolution
service.
Whilst the Scottish
Parliament is currently
considering the
introduction of tenancy
deposit schemes as part
of the proposed
regulation of private
landlords within the
Housing (Scotland) Bill,
south of the border
the government has
already abandoned the
national Tenancy Deposit
Scheme it introduced
last year with the aim
of implementing speedy
and efficient resolution
of any deposit disputes
and the rapid return of
disputed deposit monies.
More recently, the
Westminster government
has launched a bidding
process for the two
types of scheme which
will succeed the Tenancy
Deposit Scheme – a
custodial deposit scheme
and insured alternative
schemes – scheduled to
come on stream next
year. Both types of
scheme will contain a
dispute resolution
process.
The chief difference
between the two types of
scheme is that, where
the landlord is not
joined to one of the
insured options, the
custodial scheme will
hold all deposits
whilst, under an insured
scheme, deposits are
retained in the usual
manner until such time
as a dispute rears its
ugly head.
The year-old Tenancy
Deposit Scheme, which
has the backing of the
three main professional
bodies active in the
private rented sector –
the Association of
Rental Letting Agents
(ARLA), the National
Association of Estate
Agents (NAEA) and the
Royal Institution of
Chartered Surveyors
(RICS) – is bidding to
run one of the insured
schemes which will be
aimed, primarily, at
tenancies arranged
through regulated
agents, though is likely
to include other
approved bodies, such as
landlord associations.
The starting date for
all schemes is October
2006, by which time it
is anticipated that one
custodial scheme and
several insured schemes
with different pricing
structures will be
introduced.
The British Property
Federation has expressed
disappointment at the
government’s decision to
have only one custodial
scheme, suggesting that,
in practice, this will
inevitably lead to the
many responsible
landlords being obliged
to foot the bill for
disputes arising either
from a few irresponsible
landlords or a few
irresponsible tenants in
order to protect a small
number of tenants who
have been abused by
landlords.
Research by ARLA
suggests that 40 per
cent of landlords know
little if anything about
the government’s
proposals for tenancy
deposit schemes. Given
the often minor sums
involved in such
disputes, and the rarity
of disputes arising – at
least on an individual
landlord basis – this
lack of interest is
perhaps understandable.
Nevertheless, the
implications of the
government’s proposals
are likely to be
significant so that both
landlords and tenants
would be well advised to
seek advice on how the
proposals are likely to
affect them.
Property managers are
well placed to provide
such advice to both
parties. Indeed, heeding
the advice of a property
manager when drawing up
a rental agreement at
the outset can go a long
way to removing any
causes for disputes
arising in the first
place.
It is vital, for
example, that a full and
comprehensive schedule
of condition and
inventory is prepared
and agreed upon by both
parties at the outset.
Whilst it is all too
easy to gloss over any
supposed minor details,
practice has shown that,
in the event of a
dispute arising, what
had been considered
minor can easily
escalate into a major
bone of contention.
Landlords and tenants,
then, cannot be
fastidious enough.
But whilst such
precision should go some
way to removing at
source the cause of
disputes arising,
proposals for the
introduction of a
dispute resolution
service, regardless of
the particular form that
tenancy deposit schemes
take, are to be
welcomed. Whether
Holyrood opts to follow
the Westminster lead
remains to be seen.
Whilst some observers
with no vested interest
might regard the
legislative proposals as
little other than a
storm in a (chipped) tea
cup, it’s worth bearing
in mind that a simple
chipped tea cup to a
tenant might have been a
priceless family
heirloom to a landlord –
though it would have to
be an unusual and
imprudent landlord who
furnished his rented
accommodation with such
valuables in the first
place.
Jack Fulton is a
Director at Ross +
Liddell property
managers
ENDS
751 words
Ocober 2005
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