The agency Masella Coupe took £304,000 of tenants’ deposits from an account protected by insurance-based scheme MyDeposits, using they money for other purposes when they needed it over a two-year period between 2009-2011.
Although the fraud was eventually exposed by auditing by the MyDeposits deposit protection scheme, the agents were able to cover themselves by depositing cheques they knew would later bounce. This allowed the bank account to show briefly the required figures required to pass the MyDeposits inspection.
The agents have now been prosecuted but the case shows the inherent problem with protection schemes that allow letting agencies to hold tenants’ deposits as though it were their own, leaving the money exposed to unscrupulous individuals and organisations.
It follows a case from earlier this year which saw rent-to-rent landlord Daniel Burton disappear with thousands of pounds of renters’ money. He had also been a member of the MyDeposits scheme, but was expelled, leaving the money unprotected.
Generation Rent is consulting on how deposits could be better protected, starting from the point that this is not the landlord or agent’s money. Rather, we argue that renters should feel secure that their money is protected at all times, and that arbitration processes should be improved to work better for those living in the private rented sector.
We set out a number of options to ensure that renters can have full confidence that their deposits will be safe, that they will be dealt with fairly and that they can get them back in a timely manner at the end of a tenancy.
Our proposals include:
- Treating deposits as savings accounts attracting tax relief
- Giving tenants the right to choose which scheme is used
- Standardising terms of arbitration
- Alternative deposits, including bonds and tenant-purchased deposit insurance and the right to secure against your pension pot.
- Obligations for claims against deposits to be lodged speedily and penalties for unfounded claims. A right to a refund if a landlord fails to spend claimed monies on repairing alleged damage.
Click here to read the consultation document and please send any responses to [email protected] by Monday 18 August. We would like to hear from private renters, housing groups and those interested in improving policy in this area about the ideas outlined in the consultation and any other suggestions you might have. We’ll then be putting our final proposals to Government and working with decision makers to improve this area for renters.