Rogue landlord deposit protection scams explained

by | Jun 9, 2020 | Safer Renting

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Since April 2007 there has been the statutory requirement for deposits taken on assured shorthold tenancies, to be protected in 1 of 3 different protection schemes.

For some bizarre reason this has always been an unpopular law among many in the landlord community.

When presenting to landlord groups or fora, which I do from time to time, I am regularly buttonholed by someone saying “The deposit protection malarkey? Is there any way around it?”

Despite grumbling, most landlords will do it, though there is still often confusion, particularly when it comes to serving the prescribed information of the scheme on the tenant and any ‘relevant persons’, most often you get presented with a copy of the protection certificate, which is not the prescribed information, whose requirements are set out in statutory instrument No. 797 HOUSING, ENGLAND & WALES The Housing (Tenancy Deposits) (Prescribed Information) Order 2007”

So lets look at part of SI 797 and see what it says about the prescribed information that the landlord has to supply:-

“(a) the name, address, telephone number, e-mail address and any fax number of the scheme administrator of the authorised tenancy deposit scheme applying to the deposit;

(b) any information contained in a leaflet supplied by the scheme administrator to the landlord which explains the operation of the provisions contained in sections 212 to 215 of, and Schedule 10 to, the Act;

c) the procedures that apply under the scheme by which an amount in respect of a deposit may be paid or repaid to the tenant at the end of the shorthold tenancy (“the tenancy”);

(d) the procedures that apply under the scheme where either the landlord or the tenant is not contactable at the end of the tenancy;

(e) the procedures that apply under the scheme where the landlord and the tenant dispute the amount to be paid or repaid to the tenant in respect of the deposit;

(f) the facilities available under the scheme for enabling a dispute relating to the deposit to be resolved without recourse to litigation”;

Clearly not the deposit protection certificate.

In many rogue landlord scenarios you don’t see any of this anyway, because most rogue landlords don’t bother with deposit protection and in a sense that kind of flagrant disregard is far easier to deal with.

Failure to comply with deposit protection will invalidate any s21 notice served and will leave the landlord open to an application in the courts for the return of the deposit and a penalty of up to three times the amount of the deposit but what happens in the limbo between blatantly not complying at all and landlords simply getting the procedure wrong?

But what about the grey areas where a rogue landlord or agent will construct evidence to hoodwink the tenant and their advisers?

The problems

It is difficult for tenants to deal with deposit protection scamming. The correct forum for such disputes is the county court and you need:-

·         Proof the deposit was paid.

·         Evidence of who is holding the deposit.

·         Proof from the 3 schemes that it isn’t lodged with them.

The latter of course is easy enough to establish but the first 2 are where the scams begin.

Technique #1

This particular scam involves taking the deposit but writing “£0” on the ‘Deposit taken’ section of the rental agreement, in the safe and secure knowledge that many tenants don’t read the contract or as is also common, those being exploited having English as a second language and simply not being able to read the tenancy agreement, or know the requirements for deposit protection.

When seeking advice it is difficult to argue about deposit protection when the paper evidence states no deposit was taken.

Technique #2

This method again has an agreement with no deposit listed but the tenant is given a separate receipt for it. However, whilst the receipt shows the money received, it doesn’t say what it’s for, so effectively its not much use as evidence of deposit paid.

Technique #3

The landlord and the agent arguing over who has retained the deposit.

Whilst the law requires the landlord to protect the deposit you can also go after the agent if it is evident that they are person’s holding it.

Technique #4

Simply stating in the tenancy agreement that the deposit is protected with Company  X but when you check with them, it isn’t.

Technique #4

This is where the rogue landlord or agent calls the deposit something else, in order not to have to protect it.

I’ve seen it referred to it as “Additional rent in advance”, “Service charge” or even “Non refundable deposit”.

In the recent prosecution of London Lifestyle Club, a copy of whose agreement we have, the deposit is called a “Joining fee”, following the logic that the renters are not tenants but members of a club.

Watch out for deposit scams. They are difficult to navigate, dependent on the level of evidence and the determination of the scammer.

There are no quick fixes.

Of course the tenant could recover their deposit by simply withholding the last few weeks rent, except this is not a permissible procedure and can lead to the tenant being accused of being in rent arrears.

One way to resolve this would be the hotly discussed ‘Deposit passport’ scheme. Where the tenant protects their own deposit and it is passported to new rentals as they move accommodation, leaving the rogue landlord nothing to get their hands on.

By Ben Reeve-Lewis (edit as needed)

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About Cambridge House Safer Renting

The Cambridge House Safer Renting team present the ‘go-to’ blog on the world of the Shadow Private Rented Sector.

We monitor the world of rogue landlord and agent activity, publicise developments, circulate innovative ideas, keep readers abreast of changes in laws and regulations, raising awareness of criminal trends and scams, celebrate successful actions and interview people working in the field, connecting up anyone involved, from tenants and their advisers, to enforcement officers, lawyers and journalists.

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