A new report carried out by the Centre of Economic Business Research (Cebr), has recently revealed that around 300,000 landlords are facing fines for not holding tenant deposits in a correctly government-backed scheme.
It is thought that rule breaking landlords could be earning a total of around £8.5 million a year in interest on deposits that are supposed to be safely kept by a third party system.
The Importance of Tenant Deposit Protection
Since April 2007, landlords have legally been required to place any deposit they receive from their tenants into a government-backed tenancy deposit protection (TDP) scheme. The scheme was introduced to guard renters from unreliable landlords who would hold onto or dock deposits for unjustified/untrue reasons once a tenant vacates the property. This often occurs with landlords operating in University zones as they see it as a profitable and easy-to-manipulate area.
Approved Tenancy Deposit Protection Schemes
Currently the three approved schemes in England are as follows:
- My Deposits
- Deposit Protection Service
- Tenancy Deposit Scheme (TDS)
Any deposit should be entered into these TDP schemes within 30 days of the receipt. Each landlord is expected to give their tenants clear and detailed information regarding the deposit. In the case of any problems, when the scheme is used, it gives both landlords and tenants the ability to enter into dispute resolution service, opening up the opportunity for a fair outcome.
Roughly there are 1.9 million landlords in the UK. Based on recent trends, the Cebr projects only around 85% of landlords in the UK are actually complying with the scheme. That means that alarmingly, 15% (around 284,000) of landlords are not protecting tenant’s deposits in the correct manner.
This misconduct opens them up to fines, which can be up to three times the initial deposit taken. The Cebr estimates that on average landlords took £795 from renters in 2015 for their deposits. In that case, landlords in question can be exposed to a fine of up to £2,400.
If these rogue landlords do fail to provide tenants with scheme information within the first 30 days and the payment protection is not in place, legal action can be justifiably taken.