The lettings deposit system in the UK is broken, placing financial pressure on tenants in the private rented sector and needing urgent reform, according to a new report.
Some tenants face waiting weeks to get their money returned or having to challenge charges that they feel are unreasonable, according to the study from consumer group Which?
It found that 43% of renters that faced moving costs used a credit card, loan or overdraft, or borrowed money from family and friends, to cover the cost of moving into a property.
Among tenants who had moved out of a rented property in the last two years, 16% who received their deposit back said it took more than four weeks to do so, with 31% of tenants having to pay a new security deposit when they didn’t have their previous one back.
The report also highlights issues tenants face with deposit deductions. Over half of tenants, some 55%, who didn’t get their money back in full challenged the decision.
The top reason for a deduction concerned issues over cleaning which affected 50% while damage to the property affected 32%. However, 81% of tenants who faced a deduction for cleaning, and 75% of those who faced a deduction for property damage thought this was unreasonable.
Some 9% of tenants said that the landlord or agent gave no reason for why deductions were made and Which? says that the results highlight a lack of clarity about what deposit money can be used for.
For example, 62% of landlords incorrectly believed it could be used for unpaid utility bills. As a result, Which? believes tenants and landlords need clearer guidance on what reasonable deductions can be made.
The organisations suggests that clarity and transparency should also help to improve trust in the deposit adjudication system, as currently just 33% of tenants who raised a dispute said that they were satisfied with their deposit scheme.
Which? believes the Government must review the deposit adjudication schemes to ensure they are working in the best interests of tenants, and must provide renters with an effective route to escalate issues with the deposit adjudication service if they do not feel their complaint has been adequately dealt with in house.
It calls for a review pf the current cash based deposit system, and suggests that the Government should consider possible alternatives to avoid tenants having to cover two deposits when moving between properties. These include new insurance-style options and direct transfer of deposits between properties.
The report suggests that all landlords should be required to register with local authorities, with information logged on a publicly available database and linked to the existing register of rogue landlords and agents established in April 2018.
It also suggests the creation of an independent regulator for lettings and management agents with a mandatory, legally binding code of practice and strong penalties for rogue operators and a review of tenancy agreements used by letting agents to establish how widespread use of unfair, inaccurate or misleading terms and conditions is and if further action, for example an investigation by the Competition and Markets Authority, is required.
‘The number of people going into debt to cover the cost of a new deposit is concerning, particularly when you consider that many are forced to wait a significant time to get their previous one back, and could then face deductions that they don’t think are reasonable,’ said Alex Neill, Which? managing director of home products and services.
‘The findings highlight how the deposit system is crying out for reform so that it is fit for purpose for the record numbers of people who are living in rented accommodation. We believe that the Government must tackle the issues that we have identified in our report head on to ensure that the rental market delivers for consumers,’ he added.
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