Official Report: Minutes of Evidence

The Chairperson (Ms P Bradley): I welcome to the meeting Eamonn Hunt, Daren King, Kate Mutter-Bowen and Alison MacDougall. Eamonn, are you going to begin your presentation?

Mr Eamonn Hunt (Tenancy Deposit Scheme): Alison will speak on our behalf this morning.

The Chairperson (Ms P Bradley): Good stuff. Go ahead, Alison.

Ms Alison MacDougall (Tenancy Deposit Scheme): Good morning, everyone. Thank you very much for the opportunity that you have given us to speak to you this morning. As schemes, we have digested in full the contents of the Bill, but we have limited our response to the areas that are directly relevant to how we operate our schemes and how we foresee the impact of the provisions on our tenant, agent and landlord customers.

Generally, we are very supportive of the provisions. We regard them positively. We are familiar with most of what we have seen because we operate under similar provisions elsewhere in our businesses across the UK in general. As I go through our very brief submission, I will pick up on a couple of points where we would appreciate a bit of clarification.

As far as we are concerned, the main provision is the introduction of a limit on the size of individual tenancy deposits to the equivalent of one month's rent. We operate tenancy deposit caps elsewhere in the UK, so we are familiar with them. Our only comment is that the size is different to what we are used to elsewhere, but it is not an issue for us.

The first point to raise is around how we go about facilitating protection for our customers. At the moment, when we operate elsewhere, we take the view that we are not there to enforce the provisions.

As schemes, we all give quite a lot of guidance on what the level of deposit should be. However, on the basis that it is not really our role to enforce the provisions and, more importantly, that it is better to have the deposit protected than to turn people away from protection, we do not actually stop agents or landlords who are trying to protect an amount that is in excess of the relevant limit. It would be helpful for us to have a little clarification on that if possible.

The second issue relates to the recoverability of any excess deposit and the circumstances in which that might apply. We have wide-ranging experience elsewhere, particularly in England, of releasing excess deposits regularly, usually when tenancies come to an end. The whole mechanism around that is familiar to us, and we are comfortable with that, so we do not foresee any difficulty with replicating what we do elsewhere for these provisions.

The one thing that we are slightly unsure of in that area is what happens where a fixed tenancy comes to an end, and a tenancy rolls over to become a periodic tenancy. In our various discussions on the provisions, we picked up that there is still some uncertainty as to whether the provisions of the 2013 Superstrike v Rodrigues case in England would apply in Northern Ireland. In that case, it was decided that a new statutory periodic tenancy that arose at the end of a fixed term was legally a new tenancy. Although that is not something that we could not manage, it has some implications, and it would be useful if we could have some clarity on it.

The third area that our paper touches on relates to the proposed new time limits for protecting deposits and serving the required information on the tenant. Again, those are not directly relevant to us, but they are relevant to our customers. It is certainly the case that agents and landlords find the 14-day limit for protection pretty challenging. Therefore, extending that to 28 days is, I am sure, extremely welcome. We noticed, however, that the proposal is also to extend the time limit for the prescribed information from the current 28 days to 35 days. We are curious about that and make the practical suggestion to align the two dates; we see no reason why they should not be aligned.

In a practical sense, all the schemes offer landlords and agents the ability to use pre-populated templates where they have to fill in only the extra information that is relevant to them. In our experience, they tend to do the whole thing in one go. So, they protect the deposit and serve the prescribed information at the same time. Therefore, 28 days or 30 days would be an entirely appropriate period in which to be able to accomplish both tasks and might avoid any element of confusion caused by having two timescales.

In a nutshell, those were the points that we wanted to raise, but, as I said in my initial comments, we make them in the context of welcoming the proposals, being positive about them and being confident that we can work easily with them.

The Chairperson (Ms P Bradley): Thank you, Alison, for that. The Department will certainly come back on the issues that you raise for clarification. It is up to it to clarify those issues. The Department listens in and is usually very quick to get back to the Committee with clarification. We will ask it to cover that.

Ms Armstrong: Thank you very much, Alison. You mentioned the tenancy deposit elsewhere in the UK. What is the average deposit outside Northern Ireland?

Ms MacDougall: You are challenging me. I know that it is about £640 in Northern Ireland. In Scotland, it is north of the figure in Northern Ireland but under £1,000. In England, I think that it is about £1,000 at the moment. I do not know whether my colleagues have more precise information on that.

Mr Daren King (Deposit Protection Service): I am from a letting protection service. In England, the average deposit is around £850 to £900.

Ms Armstrong: Is that based on a number of months of rent? What is that figure based on?

Mr King: It is an average of the deposits that are protected within the scheme. They can vary from £500 through to £1,200 or £1,500. The average deposit protected at any point is about £850 to £900.

Ms MacDougall: Every six months, the Government send us information on the total deposits held by the three schemes and the averages, so we can certainly come back with more precise numbers, if that would be helpful.

Ms Armstrong: It would be useful to find out. The Bill talks about the deposit being no more than a month's rent, for instance. It would be useful to find out how that cost is defined in other areas.

In your experience, what percentage of deposits in Northern Ireland is returned, and what percentage is retained?

Ms MacDougall: I am not sure that we have that precise data. Eamonn, might we be able to come up with that data?

Mr Hunt: I can look to see whether I can find it. The majority are returned. At the last calculation, the dispute volume was less than 1% of all deposits held in Northern Ireland. The majority of deposits are returned in full, and there are very few disputes at that level.

Ms MacDougall: If the question is aimed at finding out whether people tend to stay in the property for a further fixed term or move on to a separate property, we can see whether we can dig out that information as well.

Ms Armstrong: I ask because, from our experience of those who stay for under 12 months, particularly from speaking to students, the number of deposits being returned appears to be very low. It interests me that the percentage of disputes is about 1%. If you could get us figures to confirm that, that would be brilliant. Leading on from that, do private renters know that they can dispute their deposit not being returned? How are they communicated with? How do they know about their rights on that?

Ms MacDougall: That is part of the prescribed information that is given to the tenant at the start of the tenancy. The deposit, hopefully, gets protected. Each of the schemes offers landlords and agents the facility to have their prescribed information pre-populated, and that prescribed information includes the requirement to tell the tenant where the deposit is protected. I think that I am correct in saying that all of us issue what we call a deposit protection certificate — a piece of paper that tenants can access in their account — that tells them that their deposit is protected and how much is protected etc. A leaflet and other information provided to tenants at the start of the tenancy explain who has the deposit and what the tenant might need to do at the end of the tenancy to access it. The way in which we do it depends slightly on the type of scheme that protects the deposit. For example, an insured deposit generally involves having a discussion with the agent or landlord who holds the deposit. In the overwhelming majority of those cases, an agreement is reached between the parties, and the agent or landlord who holds the deposit divides it out in accordance with that agreement.

If there is no agreement, the tenant can approach the scheme that holds the deposit to explain that there is a problem with getting it back. The scheme then asks the agent or landlord to send the deposit to us, and we conduct a dispute resolution process. It is slightly different for custodial protections because, in those cases, the schemes physically hold the deposit, so, in every case, both parties come to the scheme to facilitate its release. A tenant, landlord or agent can start the process, and the schemes will communicate with the other party. Hopefully, and, again, in the overwhelming majority of cases, the parties agree the release without the need for any dispute mechanism to come into play, but, where that is necessary, offering a free dispute resolution process is, of course, part of what we do.

Ms Armstrong: Thank you. Alison, is all of the deposit not protected? Unless I picked you up wrongly, it seemed that not all of the deposit is protected.

Ms MacDougall: Sorry if I misled you. I was trying to say that, if there is a situation where the deposit is protected under insured provisions, the deposit remains held by an agent or landlord throughout the tenancy. The schemes become involved in holding an insured scheme deposit only if there is a problem at the end of the tenancy. It is not necessarily the case that there is a problem with the whole deposit. We ask the agent or landlord to submit to us only the amount that is in dispute, which is not necessarily the whole deposit.

Ms Armstrong: In your experience, once you become involved in a dispute, how long does it take for a deposit to be returned to a tenant?

Ms MacDougall: If the dispute is in the custodial world, the parties have to go through a repayment process that involves statutory time limits. Our dispute process operates in broadly the same way. We all have a way of asking both parties to provide us with evidence. In our case, each party gets two weeks in which to provide evidence. We spend a day or two making some checks, after which the case in question is allocated to an adjudicator. The regulations require us to produce our final decision within 20 working days. The decision is therefore made, effectively, within a month of the point at which the information is available to us.

Ms Armstrong: Thank you. That is very helpful.

Mr Frew: You say that the percentage of disputes is low. Is there a common theme in why deposits are not handed back?

Ms MacDougall: We could comment on the issues that are most prevalent, which tend to be cleaning issues. That is not just a Northern Ireland thing; it is the same in Scotland and England, and it has been the same since the schemes were set up. There is something emotional, I think, about cleaning that causes people to argue about it.

To an extent, disputes are sometimes a matter of fact; sometimes things need to be rectified, and the parties have strong views on who is responsible; and sometimes they are an attitude of mind. Unfortunately, we all have to deal with a number of disputes where, even though the sum in dispute is small, people say, "This is a matter of principle. It is only five pounds, but we need it sorted." It is a variety of things. It is often the case, and we are probably all similar in this respect, that each dispute probably ends in each party receiving a part of the deposit. Therefore, it is relatively unusual for the tenant to secure the return of 100%, or for the agent or landlord to secure the award of 100%. Most involve an element of the disputed deposit being shared. That reflects the fact that, probably, both parties have some merit in their case.

Mr Frew: Is there a trend that, for most tenants who own a pet, deposits are withheld for cleaning almost by default?

Ms MacDougall: Not in our experience. I do not know whether the others want to come in on this. Pets seem to generate an awful lot of interest and discussion. Part of my other role is running dispute resolution for Tenancy Deposit Scheme throughout the UK. Therefore, I can talk about this in relation to all the jurisdictions. It is our experience that pets are not a major factor in the disputes that we see. My view is that a pet may have a tendency to cause some damage or create some cleaning requirements in the same way as other factors in how people live in a house cause these things. However, pets do not loom large in our dispute world.

Mr Hunt: I am happy to clarify that it is the same from our perspective. It is just as Alison has said. Pets are not seen very often in our disputes.

Ms Kate Mutter-Bowen (mydeposits Northern Ireland): I would say the same. It is not the main issue. Obviously, some disputes involve pets, but, as Alison said, cleaning and, perhaps, gardens are the main issues.

Mr Frew: In your experience, do many landlords accept only cash payments?

Ms MacDougall: Eamonn, do we have experience of that?

Mr Hunt: In my experience of dealing with landlords and from my discussions with them, that would apply to only a very low percentage. Although a proportion may take cash payments, the majority of payments are online. Tenants like to make bank transfers. It keeps a track record of all their rental payments, which is important, rather than paying cash.

Mr Frew: Do any disputes arise from cash payments?

Mr Hunt: Not in our dealings.

Ms MacDougall: We see cash very rarely. Certainly, there are not cash payments for deposit or for rent throughout a tenancy. Very occasionally, we might get a dispute where the tenant has changed bank account or something. For one rent period, because their direct debit failed, they popped into the agent's office and handed over cash. We all give very clear guidance in those circumstances that agents or landlords should provide rent receipts and that tenants should ask for them.

Mr Frew: Clause 3, which you have centred on, amends the Private Tenancies (Northern Ireland) Order. It substitutes article 5 with clause 3(3):

To be honest with you, I do not like that. I am not comfortable with that. It should never be the case that somebody who offers cash does not get a receipt. I believe that, if a receipt is not available at that time, the cash should be withheld until such time as a receipt is available. That line, I believe, needs to come out. Do you have any thoughts on that? I will read it again:

— which is fine —

I do not believe that that line should be there.

Ms MacDougall: It is difficult to imagine why it would not be possible to provide a receipt. It is not an onerous requirement, and it can be adequate to have a written note with a date and a signature to confirm receipt. In practical terms, unless someone is handing over money to someone else in the street, it should be possible to provide a receipt immediately. I tend to share your concern about that.

Mr Frew: OK. Thank you very much.

The Chairperson (Ms P Bradley): Thank you for your time with us today. There is nothing further that we need to explore. I appreciate your being with us. We will ask the Department to come back with answers to the concerns and queries that you raised. Is that OK?

Ms MacDougall: That is great. Thank you very much.

The Chairperson (Ms P Bradley): Thank you so much.