Rental deposit system ‘broken’ and forcing tenants into debt

The “broken” rental 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, a report has revealed.

The study found that among tenants who had moved out of a rented property in the last two years, one in six who received their deposit back said it took more than four weeks to do so, with a third of tenants having to pay a new security deposit when they did not have their previous one back.

Landlords who charge deposits have to put them into a tenancy deposit scheme within 30 days of the rental starting. Three tenancy deposit schemes are operational in Scotland.

The consumer group has called for all landlords to register with local authorities and the creation of an independent regulator for lettings and management agents with a legally binding code of practice and strong penalties for rogue operators, as well as a review of tenancy agreements used by letting agents to establish how widespread use of unfair, inaccurate or misleading terms and conditions is.

The study found that the two most common reasons for a deduction were cleaning and damage to the property. However, eight in 10 tenants who faced a deduction for cleaning and 75 per cent of those who faced a deduction for property damage thought this was unreasonable.

One in ten respondents even said the landlord or agent gave no reason for why deductions were made.

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.”

The consumer champion’s findings reveal that two in five 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.