Offsetting the cost of deposit protection; where to draw the line?

A provocative discussion was brought to the fore last week regarding the cost implications of deposit protection, an emotive topic which incites recurrent queries from tenants, landlords and agents alike.

The discussion on PropertyTribes centred around a landlord who received a deposit from a tenant but left it unprotected because the tenant did not pay a £30 fee. At renewal the landlord increased that fee to £50, informing the tenant that it would remain unprotected if the fee wasn't paid. Was the landlord in breach of the law? Yes - for failing to protect the deposit within 30 days of receipt. But what does the law say about charging tenants to protect their deposits?

The Housing Act is silent on whether a charge for the administrative costs of registering a deposit can be charged to the tenant. Therefore, it is safe to assume that such charges are permissible. For more details on fees, we have to look beyond the Housing Act.

Offsetting the costs of deposit protection

In accordance with the Advertising Standards Authority, the Consumer Rights Act 2015 and Consumer Protection from Unfair Trading Regulations 2008, agents must provide clearly defined details of fees and expenses which may become payable. If the agent does not know the exact amount at the time, they should give details of how it will be calculated, including a renewal commission and the method of calculation. The aim is that both tenants and landlords are able to understand what a cost is for and why it is being imposed. Deposit Protection administration costs should therefore be detailed upfront if being charged, either to the tenant or the landlord.

It should be noted that the law does not allow charges for access to the alternative dispute resolution service.

How much is too much?

If the administrative costs can be passed on, this inevitably leads to the question, how much? Unfortunately there is no definitive answer to this question. A matter of judgement, it is subjective to each landlord or agent and their individual processes. But is there a price which is simply too much and outside the scope of ‘reasonable?’

At TDS when the query is raised by a tenant, we underline that we are an insured scheme that charges our members, rates which can be viewed online, and that they are not prohibited from charging the administrative costs of protection to tenants, and that we do not have the jurisdiction to police this. 

If, and how much to charge is a matter of judgement. Many agents do not think it is right to charge the tenant to carry out the landlord’s duties on the landlord’s behalf. Others see it as a service benefitting tenants, so reaonsable for them to bear the cost. For others it is simply another of the many costs which, for better or for worse, have to be offset in order to stay in operation.

What is clear is that deposit protection cannot be made conditional; no if’s, no buts. The deposit must be registered within 30 days of receipt and documentation supplied. If a deposit holder tries to hold deposit protection ransom in return for a fee, they may find themselves at the mercy of the courts for failure to comply with the Housing Act.

What is your view? Join the debate on TDS LinkedIn

 

Challenging deposit protection charges

Where there are concerns and tenants believe they have been unfairly charged our best guidance is to contact the redress scheme of which their agent is a member. Agents must hold membership of one, by law.

The schemes are:

The Property Ombudsman (TPO)

The Property Redress Scheme

Ombudsman Services Property

 

 


Posted by Ben Beadle on 24 August 2015

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