New research from the Centre of Economics on behalf of money.co.uk has shown that 1 in 7 landlords do not protect their tenant’s deposits through a third party, despite government intervention to make it a legal requirement.
It is estimated that £514 million worth of deposits are not protected, earning landlords almost £8.5 million of interest per year – enough to pay off over 500 student’s debt.
Landlord’s use the term ‘reservation fee/ deposit’ when asking for deposit money from tenants, allowing them to keep the money unprotected until the tenancy starts.
Normally deposits must be protected 30 days after it is received by the landlord; by using this loophole landlords only have to protect the money until 30 days after the start of the tenancy. This can equate to up to 7 months of interest if tenants sign a contract in January.
Unprotected deposits mean that, if a company were to go bankrupt, tenants would not get their money back. Shadow Foreign Secretary and Leeds Central MP Hilary Benn has recently been made aware of this loop hole and is currently petitioning the issue to parliament.
If you feel your landlord has failed to protect your deposit in a government-backed scheme, or has taken longer than 30 days to do so, then the court can order your landlord to pay compensation of up to three times your original deposit.
However, it is up to tenants, not the police, to prosecute their landlords, as there are currently no government measures in place to police the issue.
Hannah Maundrell, Editor-in-Chief at money.co.uk said: “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. “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.
“This works for Scotland and Northern Ireland and it seems crazy this hasn’t been brought in across the UK.
“Add in tenants’ ratings and reviews to this too and you have both the beginnings of a solution that helps renters make an informed choice about who they’re handing over buckets of cash to; and the foundation for policing landlords that are currently going unchecked.”