A new report by Which? has revealed how the broken deposit system is placing financial pressure on renters, with some tenants facing weeks to get their money returned or having to challenge charges that they feel are unreasonable. The consumer champion’s findings reveal that two in five (43%) 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, one in six (16%) who received their deposit back said it took more than four weeks to do so, with a third (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 (55%) who didn’t get their money back in full challenged the decision.cThe two most common reasons for a deduction were cleaning (50%) and damage to the property (32%). However, eight in 10 (81%) tenants who faced a deduction for cleaning, and 75% of those who faced a deduction for property damage thought this was unreasonable.
One in ten (9%) respondents even said the landlord or agent gave no reason for why deductions were made. The results highlight a lack of clarity about what deposit money can be used for. For example, six in ten (62%) 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.
Clarity and transparency should also help to improve trust in the deposit adjudication system, as currently just a third (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 should review the current cash-based deposit system, and 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 findings are included in “Reform of the private rental sector: the consumer view”, a report by Which? that highlights systemic problems in the sector that the Government needs to address.
- Making all landlords 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.
- 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.
- 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.
Alex Neill, Which? Managing Director of Home Products and Services, said “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.”
“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.”