Landlords holding over £500m in deposits an 'isolated view' of the problem

Suggestions that landlords are failing to use official deposit schemes is an 'isolated view' of the issues affecting landlords and tenants, a dispute resolution lawyer has claimed.

The Centre for Economics and Business Research estimated that more than half a billion pounds of renters' money was at risk due to one in six landlords failing to use deposit protection schemes, such as the Tenancy Deposit Scheme, My Deposits, or the Deposit Protection Service.

'Renters must take control and ask landlords which protection scheme their money will be stashed in before signing on the dotted line. Existing tenants must ask for proof their money is protected if their landlord hasn't given them the correct written documentation,' said Hannah Maundrell, editor in chief at money.co.uk, the site which commissioned the research.

'It's not right that tenants are left responsible for taking their landlord to court if their deposit hasn't been protected. The government needs to step in and take decisive action. Introducing a compulsory register listing every landlord that rents out property in England and Wales would be a start.'

The research made headline news earlier this year with The Times proclaiming 'Landlords hold £500m deposits illegally'.

However, Simone J Ritchie, a senior associate in the dispute resolution team at Steele Raymond, commented that the headline research gave only an 'isolated view' of the problem. 'We also see landlords seeking advice about releasing deposits to offset non-payment of rent if a tenant does a midnight run or significantly damages the rented properly,' she remarked.

'More often than not, any monies held in deposits only go some way towards covering landlords' losses. The cost of enforcement action to recover arrears are disproportionate due to increased court fees and the chances of successful recovery leading to landlords often not pursuing legitimately owed sums.'

Conversely, Ritchie explained that if a landlord wants to issue possession proceedings, then in most circumstances they will need to have placed the deposit in a protected scheme before being able to serve the notice to quit to the tenant.

'A failure to comply means the landlords also run the risk of penalties being awarded to the tenant, which the courts are increasingly willing to order. Protecting a deposit is becoming synonymous with the granting of a new tenancy and letting agents are generally very good at ensuring compliance,' she continued.

'However, if a property is not let through a reputable company, this is where problems often arise. Both the tenant and landlord should therefore think carefully about how they either advertise their property or where they look to rent a property from.'