Communities and Local Government CommitteeWritten evidence submitted by The Dispute Service Ltd

1. Introduction

1.1 The Dispute Service Ltd is a not for profit company limited by guarantee which provides Alternative Dispute Resolution services, mainly in the private rented sector. Established in 2003 by the Royal Institution of Chartered Surveyors (RICS) and the National Federation of Property Professionals (NFOPP), it currently runs the Tenancy Deposit Scheme in England and Wales under contract to the Department of Communities and Local Government.

1.2 In addition it is the lead partner in SafeDeposits Scotland Ltd, which is one of three custodial tenancy deposit schemes operating in Scotland since 2 July 2012. Its partners in this venture are the Scottish Council for Voluntary Service, NFOPP, RICS, the Scottish Association of Landlords and the National Union of Students Scotland.

1.3 It protects almost 900,000 tenancy deposits in the England and Wales insurance backed scheme, covering over £1 billion of deposits and offers a free Alternative Dispute Resolution service to deal with disputes over the return of tenancy deposits. Since 2007 it has dealt with over 42,000 tenancy deposit disputes. In Scotland, SafeDeposits holds c60,000 deposits.

1.4 TDS Northern Ireland Ltd, a wholly owned subsidiary of The Dispute Service, is bidding to operate a custodial and insurance scheme in Northern Ireland in 2013.

1.5 The Dispute Service welcomes the opportunity to provide evidence to the Select Committee. Our comments are restricted to the narrow but important area of tenancy deposit protection but will also touch on wider regulation issues.

2. The Private Rented Sector and Tenancy Deposit Regulation

2.1 The Dispute Service welcomed the introduction of Tenancy Deposit Protection in April 2007 in England and Wales (through the 2004 Housing Act) and the strengthening of consumer protection for tenants.

2.2 In July 2012 the Dispute Service Ltd published an evaluation of the tenancy deposit protection legislation and this report is included as an Annex to this submission.

2.3 The table below shows the number of tenancies protected at March 2011 in the three tenancy deposit protection schemes. In March 2011 there were c2.86 million tenancies in the private rented sector holding deposits which suggests that the level of compliance with the deposit protection legalisation is high but not 100%. Indeed our presence at a number of Lettings events always results in some landlords advising us that either they have very little knowledge about the need to protect deposits or they have deliberately been evading the legislation.

Table 1


Private Tenancies

Assured Shortholds (estimates)

Tenancies where Deposit Required

Deposits Protected

% of Tenancies with Deposits with a Protection in Place































Source: CLG data

Note: Assured shortholds estimated aat 75.3% of private tenancies and 84% take deposits.

3. Improving Publicity

3.1 There is a need to continue to promote wider knowledge of the requirements to protect deposits and this is a matter for government, landlord and lettings bodies and the deposit protection schemes. In the autumn of 2012 the BBC One programme “The One Show” had a small item on deposit protection and this led to a huge spike in calls to both our Call Centre and those of the other schemes. This shows powerfully the impact which wider publicity can have on consumers.

Recommendation 1:

The government should work with the tenancy deposit schemes to co-ordinate a publicity programme directed at consumers on tenancy deposit protection issues.

4. Improving Compliance

4.1 Non-compliance with the legislation is only enforced by tenants taking action in the County Court where a landlord has not protected a deposit within the statutory time period nor provided the Prescribed Information (PI) to tenants. There are no official records of the number of such cases in the County Court but anecdotally cases are few and far between. A landlord should not be able to obtain possession without being able to demonstrate that the deposit has been protected and the PI served and it might be helpful if the Ministry of Justice issued reminders to the District Judges who deal with possession hearings in the county court on this aspect of the legislation.

4.2 Greater publicity for successful claims by tenants might also assist in increasing levels of compliance and the Ministry of Justice might wish to consider how best to record cases before the Courts.

Recommendation 2:

The Ministry of Justice should consider how best to record the number of deposit protection cases before the courts.

Making claims for Universal Credit in the private rented sector conditional on providing evidence that deposits are protected

4.3 The introduction of Universal Credit presents an opportunity to secure higher levels of compliance with deposit protection legislation in the private rented sector if claiming Universal Credit for rented housing costs in the private sector was dependent on the landlord providing a valid Tenancy Deposit Protection certificate.

4.4 This would require landlords and their tenants to provide a valid certificate and local authorities having access to the Tenancy Deposit Schemes databases to validate certificates.

4.5 Such an initiative would almost certainly improve compliance levels by those landlords who house the more vulnerable tenants and according to Shelter this seems to be where the highest level of non-compliance is occurring.

Recommendation 3:

The government should introduce a requirement on landlords to provide a tenancy deposit protection certificate as a condition of their tenants receiving Universal Credit in respect of housing costs on an assured shorthold tenancy.

5. Unregulated Lettings Agents

5.1 Agents who are subject to some form of professional regulation (such as ARLA, NAEA, RICS, UKALA, NALS, Law Society) benefit from professional training, legislative updates, workshops and briefings on aspects of tenancy deposit protection. In our experience they are much better prepared in the area of deposit protection than unregulated lettings agents or individual landlords.

5.2 Customers of regulated agents also have access via the regulatory bodies to a form of Client Money Protection which can provide additional cover for landlords’ and tenants’ monies in the event of a regulated agent ceasing to operate or conducting a fraudulent activity. No such protection is in place for clients of unregulated agents.

5.3 In our view no letting agent should be able to operate unless they are a member of a regulated body, have CMP insurance in place via that body, have access to professional training and advice and offer access to independent redress via an Ombudsman scheme.

Recommendation 4:

The government should introduce a requirement on lettings agents to be a member of a regulatory body offering training, client money protection insurance and requiring independent consumer redress.

6. Landlords

6.1 The Dispute Service also offers tenancy deposit protection insurance service to landlords. We have clear evidence of new landlords struggling to understand the complexities of renting (and tenancy deposit protection is but one of the many statutory requirements requiring compliance).

6.2 A form of Landlord accreditation is likely to lead to an increase in standards in the sector and again it might be possible to restrict the payment of Housing Benefit/Universal Credit where the landlord was not an accredited landlord under a national or local scheme.

Recommendation 5:

The government should consider the introduction of a landlord accreditation scheme with a link to the payment of Housing Benefit/Universal Credit.

Improving protection for landlords

6.3 Where a letting agent fails to submit a disputed deposit to an insurance backed deposit scheme, the scheme protects any part of the deposit owing to the tenant. However if there is money owing to the landlord from the deposit the legislation does not require the scheme to protect the landlord.

6.4 In these circumstances the landlord is required to claim the deposit monies owing to them from the agent or via their regulated body holding client money protection insurance. In the case of an agent in liquidation the landlord will be an unsecured creditor and will only be able to make a claim against the client money protection insurance if the agent is a member of a regulated body which provides client money protection insurance.

6.5 Since 2012 TDS has offered landlords protection on a voluntary basis where the member is in liquidation and is a member of a regulated body which holds client money protection. But this is a voluntary scheme and it might be helpful for the statutory remit of the insurance backed tenancy deposit schemes to be extended to require them to provide landlord cover in all cases where there is a disputed deposit.

6.6 However this would increase the level of claims on insurance by the schemes and would inevitably increase the cost of tenancy deposit protection.


The government should consider extending the scope of deposit protection to include monies owing to a landlord from the deposit where the deposit is held by a lettings agent.

January 2013

Prepared 16th July 2013