RESIDENTIALlettings
Comment
Deposits, disputes
and debacles
The Tenancy Deposit scheme was misused, but its response has caused an industry meltdown.
T
he recent invoices from Tenancy Deposit Scheme have been met with shock and horror. There is a certain irony here; a massive row is caused by
legislation on disputes and the TDS efforts to service that legislation. There have been complaints by the
hundred, very strong opinions, fury, despair and severe disgruntlement. Going back to the beginning, the
legislation that created the need for deposit protection organisations was designed to protect the tenant from unfairly losing his deposit. Agents were required to either lodge
their landlords’ deposits with a custodial scheme or, if members of one of the professional associations, pay a small premium to an insured scheme. The latter was more attractive to agents as it meant they could continue to hold the deposits. Agents were persuaded to join one of the insured schemes, The Dispute Service (TDS) on the basis that the TDS would resolve disputes on their behalf. The fees for the
service were based on projections on the number of disputes likely to be sufficiently serious to be referred each year. Two surprises followed.
46 MARCH 2010 PROPERTYdrum
Firstly, tenants quickly became very aware of their rights, more frequently arguing their case for the return of their deposit in full. Secondly, agents took the easy route (in some cases) and referred every dispute, major or minor to the TDS.
CASH ISSUES AND DRASTIC ACTION
The result was an overworked organisation which went from having £1 million in the bank (as shown on their accounts) to facing a severe shortage of money in the coming year. Their solution was drastic, rapid and universally deplored. Fee calculations were changed from ‘fees
per branch’ to ‘fees per tenancy’. This may have been acceptable, if it had been set that
way at the beginning, It seems logical to charge per tenancy. The second change was a ‘penalty’
payment levied on agents who had ‘more than the average in the previous year’. Again, on the surface, quite rational. The big issue with both these changes
is that they were applied without notice, without recourse, without clarification and without due consideration.
Left: Lawrence Greenberg, CEO of the TDS, said that they are working on the new rates and new invoices.
We are a small company – we cannot afford these fees and I cannot
imagine that my landlords will be prepared to pay them. Unless the fees are reasonable and justifiable, then we shall be changing to one of the other
schemes. The thing is, I don’t think
we will be the only agents to do this and there is a danger of the other
schemes being inundated with new member applications.’
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