Painsmith has recently encountered the Kafkaesque world of the tenancy deposit protection schemes, specifically the DPS and its new rules relating to the release of the deposit following a court hearing.
DPS is currently refusing to release deposits where the courts have not specifically ordered it and they have changed their rules to reflect the same. Under rule 29 (a) DPS will only release the Deposit if the Court Order specifically refers to the Deposit and how much to be paid out to the tenant.
Several of our landlord clients have obtained a possession order on the grounds of rental arrears and are finding it impossible (or very nearly impossible….or just very expensive) to get the deposit released, even where the contract specifically allows for the deposit to be applied against rental arrears.
Of course it is always open for the tenant to agree the release of the deposit to the landlord, but once possession is obtained many tenants lose interest in co-operating with their former landlord.
In the absence of an agreement from the former tenant the landlord is left to apply to the scheme to ask for the release of the deposit. We believe this should simply be a matter of drawing the scheme’s attention to the court order for possession and rent arrears and the clause in the contract, which allows the deposit to be used against rental arrears, where applicable.
However on more than one occasion recently a landlord’s application to the DPS for the release of the deposit has been refused and the applicant referred to clause 29 of the terms and condition ( see above) and informed that if they want DPS to release the deposit to them they must either arrange for the Court Order to be amended or a Third Party Debt Order to be obtained.
Concurrently, courts are refusing to make orders that would satisfy the DPS rules with many judges refusing to address the issue of the deposit on the grounds that it is a matter for the scheme and they do not want to usurp the jurisdiction of the Adjudicator.
You will recall that part of the point of these schemes was to take the matter of deposit handling away from the courts and instead use an alternative dispute resolution, that is the Adjudicator. However landlords find themselves facing courts that refuse to deal with the deposit because it is a matter for the scheme, and the scheme refusing to release the deposit without a court order so the whole thing becomes farcical.
Painsmith has historically been involved in deposit protection reform and we would suggest that between the schemes and the courts there needs to be some clarification.
Filed under: England & Wales, FLW Article, comment, consultations, deposits, Housing Act 2004, litigation, possession
An excellent and interesting post. I would mention however that the problem is not entirely new – we had quite a long discussion about it on the Landlord Law Blog in September 2009 which has comments from Kevin Firth of the DPS.
Anyone interested can read it here http://www.landlordlawblog.co.uk/2009/09/16/dps-tenant-with-ccj-unable-to-claim-back-tenancy-deposit/
I agree that the DPS refusing to accept a court order as sufficient evidence that the money is owed to the landlord is farcical. However, I concur with the court refusing to comply with the DPS’s requirements if it chooses to; why should the court bow down to a private party’s administrative rules?
But this is just one aspect of a wider problem; that of the three schemes’ administrative rules and how they relate (or don’t) to the purpose and principle of the statutory requirement for deposit protection. For example, MyDeposits (a.k.a. Tenancy Deposit Solutions Ltd) will ‘unprotect’ a deposit if a landlord goes bankrupt, or if he fails to ‘reprotect’ if the fixed term is renewed (but not, without any apparent logic, if it is replaced by a statutory periodic tenancy).
A deposit, once accepted by a scheme as protected, should remain protected, regardless of any subsequent shenanigans by the landlord etc. It should not be the case that the landlord must (sometimes repeatedly) negotiate a minefield of administrative rules in order to ensure that it remains protected.
I presume (hope) that there must be some requirements that the schemes are legally obliged to adhere to; but whatever they are, I suspect they haven’t been thought through very clearly (rather like the Chapter 4 HA2004).
The DPS clearly need to amend Rule 29(a). We have a client (landlord) with an Order for Possession and a cost award of £23,000 against a defaulting tenant and the DPS are refusing to release the deposit on the strength of the Order. They are expecting the landlord to incur further costs and wasted time in trying to have the Court alter the judgement in order to satisfy Rule 29 (a) and it is unlikly the Court will oblige.
Thank you Painsmith for this informative blog. Consequently this is provides a compelling reason for Landlords to pay a small fee to use My|Deposits instead of the DPS.
In response to the last comment, unfortunately If landlords live outside the UK they have to use DPS.
So far as DPS’s terms and conditions are concerned, their latest version (December 2011) is version number 18. When a new version is issued they do not inform landlords or tenants. Thus as terms and conditions may change during a tenancy, which version applies – the one which was current when the deposit was protected (and which formed part of Prescribed Information given to the tenant) or any later versions?
It is not true that overseas landlords can only use DPS, one of the other schemes does take overseas landlords.
DPS has a clause which allows them to change their terms which are them applicable when issued no matter when the deposit was registered.
This article fails to take into account the responsibilities of the scheme administrators (ie The DPS or either of the other two). Schedule 10 of the Housing Act 2004, specifically, paragraph 4 Custodial schemes: termination of tenancies, sub-paragraphs 4 and 5.
The scheme must be “satisifed” that the “relevant amount” (the deposit) is payable to one or the other party. Simply presenting a possession order whether on the basis of rent arrears or not is clearly not sufficient? It remains that unless it is clear from a court order that the court has consider the issue of the deposit, it cannot be assumed that the tenant has not paid / is paying any rent arrears, or has a separate agreement for repayment.
The schemes are there to protect both parties.
I disagree. If the landlord has a court order which states that x amount is owed and that is presented to the scheme asking for the deposit to be offset then the scheme can adjudicate and contact the tenant to ask whether the amount has been paid and explain that the deposit will be offset if it is not. What the scheme is doing here is sitting on its hands and failing to take a proactive approach to the matter. Which while protecting the deposit fails to resolve the issue which is the whole point of the schemes.
i have just had a judge award all the deposit back to the tenant at a defended possession hearing – and he then gave her a further 6 weeks in the property. How can he make an order for 6 weeks hence, without knowing if any further damage or arrears are going to accrue. I decided to challenge this and asked for it to be set aside…. DPS have, in spite of being told that i have a legal challenge under way, have repaid the deposit to the tenant who is still in situ….. you could not make this up.
Landlords seem to be screwed by some tenants, letting agents, councils, Deposit schemes and now judges…..