Blog Post

Outrage as TDS (Tenancy Deposit Scheme) hikes prices by over 400%

David Boyd Feb 3, 2010, 08:40 AM

David Boyd, Managing Director, PAD4U Letting Agents Manchester writes:

The TDS (Tenancy Deposit Scheme) is one of three Government schemes introduced in 2007 to regulate how deposits are collected, processed and to resolve deposit disputes.  Since inception the schemes have proved controversial.  Although supposedly the schemes act in a neutral manner to both landlords and tenants, the very naming of the schemes and certainly the manner in which we have found them to operate is solely in the interest of the tenant.  The landlord is left to protect his/her interests with the assistace of their  letting agent.

The TDS  have found themselves inundated with claims and unable to cope and control their costs.  The TDS has now, in a desperate move, axed 80 per cent of their external arbitrators who judge disputes and decide how the deposits are to be allocated between tenant and landlord.  A small in-house team will now process disputes.  This will undoubtedly lead to greater delays in processing of deposit disputes.  The response to hike up the fees that letting agents pay annually to the TDS, was the predictable response, rather than trying to understand why such schemes are fundamentally flawed in the first place.

Imagine, if I were to offer you an opportuntiy to make £400-£500 or perhaps much more by placing  a single phone call or cheaper still, registering over the Internet;  your odds are reasonable and even if you don't win, you wouldn't lose a penny for trying?  I think you would be happy to give it a go.  Well, I guess it's not surprising then, that tenants all over the UK have decieded that taking a one way bet, is a no brainer either.  Hence the TDS receiving a dramatic increase in disputes each month.  Before the TDS and other deposit schemes launched, a tenant would need to put his case to court and would have to pay a small administration fee  to the court to process his claim (no solicitor fees would need to be paid as it would be small claims matter).  If the case was found in favour of the tenant then the court fee would usually be refunded to the tenant along with the deposit.  However, if the case was not found in favour of the tenant the court fee would not be refunded.  This system ensures spurious claims do not clog up the courts.

Why then do deposit scheme's not charge a small fee (£25 for instance) to the tenant for lodging a dispute - which would be paid back if the dispute is found in their favour?   The naivety of this error typifies much of the medling in the property market by the Government recently.  Governement ideas on HIPS, Licensing, Deposits, are poorly planned and implementation not given a second's worth of thought.  Now, one of the Government schemes is on the verge of collapse and the others are probably suffering smilar problems.  Legally, however, the landlord has no choice but to use these failing schemes if they wish to take a deposit on their property.

The problems don't end there either.  The level of proof and evidence required by a landlord/letting agent if they are to have any hope of winning a dispute is beyond anything that a court would reasonably expect.  Photographic evidence (time and date stamped), naming conventions of files, CDs of images which must be posted  and labelled correctly, tenancy agreements which must contain the exact clauses required by the schemes, inventories that must follow strict criteria and have an enoumous amount of detail,  certificates that must be registered within 14 days, etc, etc.  If any of these administrative tasks is not carried out with 100% precision, then the default is the landlord losing his/her case, whether the case had merit or not.  The process is such that inventories now take over 2 hours to carry out and process, both ingoing and outgoing.  This maybe possible for properties in London which let for £1000 + a month, but for properties that rent for £400-500 it's not sustainable.

PAD4U are attempting to negotiate with the TDS and are working hard to find ways to manage the mess that the TDS now finds itself in.  Dramatic increases in fees may not be able to be fully absorbed by PAD4U (although we are trying everything in our power to do so).  Landlords may have to pay for registration of deposits in future.   Some landlords have stopped taking deposits at all, prefering to take two months rent upfront instead, but this approach has it's disadvantages also.

Ultimately rents will have to increase to cover the costs of these Governement schemes, thus every tenant will pay a price unless the Government reviews these schemes to create a more balanced approach.

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