Covid-19 Bounce Back loans for property businesses16:06 PM, 5th May 2020
About 3 weeks ago 46
After sharing in discussions on two separate threads (links below) I realise that there is some misunderstanding about how Tenancy Deposit legislation works when there is a tenancy deposit dispute.
In the first discussion the tenant is concerned that the landlord will not repay the deposit and in the second discussion it is the landlord who is concerned that the tenant can just walk away.
Whichever type of deposit protection scheme a landlord chooses to use, either the custodial scheme at no cost or an insurance based scheme where a premium is paid, the basic rules are the same.
If the landlord and tenant cannot agree on the amount of the deposit that is returned to the tenant either has the right to raise a dispute with the protection scheme. The dispute is dealt with through Alternative Dispute Resolution (ADR) where independent arbiters make a determination based on the documentary evidence provided by both parties.
Since the money belongs to the tenant unless and until the landlord can prove that he is entitled to compensation for losses or damages the onus is on the landlord to prove his case and for the tenant to dispute it. If the landlord fails to prove his case the deposit will be returned to the tenant.
During the ADR process, if the scheme is an insured scheme the deposit will be held by the landlord and therefore the scheme will ask the landlord to lodge the money with them pending the results of ADR. Once the decision has been made the scheme will repay to each party the amount to which they are entitled.
The reason this is called “Alternative” Dispute Resolution is that it offers a “free” alternative to the normal legal system but it does not replace it and either party can, if they wish, take the case to court instead. If either party decides to take the case to court the deposit protection scheme must be informed and once the case is heard they must be given the court documents to prove the result of the case. They will then distribute the money in accordance with the Court Order.
Neither party can just ignore the request of the other for ADR.
If either party fails to respond to a request from a scheme to take part in an ADR, the other party will win by default unless that party tells the scheme that he is taking the case to court. This must take place within 6 months of the issue being raised.
In conclusion it is not an option for a landlord to ignore a request for ADR where he is holding a deposit because he has used an insurance based scheme. If he fails to agree to ADR or does not take the case to court within 6 months, the scheme will repay the deposit to the tenant and reclaim it from the landlord.
If the landlord fails to respond at all ADR will look at the case based on the tenants request and will return the money to the tenant.
A landlord who fails to make the payment will be permanently removed from the scheme and his only option in future will be to lodge his deposits with the custodial scheme.
Where a tenant simply does not respond the landlord too can reclaim the deposit from the custodial scheme either through taking it to court or by using the Single Claim Process.
Sources of information
2) my\deposits – see >>> http://www.mydeposits.co.uk/sites/default/files/Tenant%20Guide%20to%20ADR.pdf
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