How ADR works in tenancy deposit disputes

by Mary Latham

14:34 PM, 15th August 2013
About 5 years ago

How ADR works in tenancy deposit disputes

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How ADR works in tenancy deposit disputes

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. How ADR works in tenancy deposit disputes

Buy to let anguish – landlord being repossessed – rent paid 6 months up front!

Tenant Disappeared

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

1) DPS – see >>> http://www.depositprotection.com/documents/reclaiming-a-deposit-2013.pdf

2) my\deposits – see >>> http://www.mydeposits.co.uk/sites/default/files/Tenant%20Guide%20to%20ADR.pdf

3) TDS – see >>> http://www.tds.gb.com/resources/files/What%20happens%20when%20the%20Court%20is%20involved%20in%20a%20tenancy%20deposit%20dispute.pdf



Comments

Romain Garcin

15:13 PM, 15th August 2013
About 5 years ago

I'm not a legal expert, however as I pointed out in the other thread (Buy to Let anguish) I don't think that it is as simple as saying that "the other party win by default".

For example, the landlord owes the deposit money to the tenant at the end of the tenancy unless the tenant agrees otherwise, a court decides otherwise, or the ADR's adjudicator decides otherwise.
But the scheme and the adjudicator have no authority to decide unless the tenant specifically agrees to it.

Therefore, IMHO if the tenant refuses ADR or does not reply to communication he still has a claim to the deposit in court against the landlord for the next 6 years even if the scheme decides that they will not hold on to the deposit for ever.
Ie. the landlord has better keeps all records handy to prove his case during that period and/or make sure to include relevant clauses in the tenancy agreement (if possible. that's one for a lawyer).

Mary Latham

15:30 PM, 15th August 2013
About 5 years ago

Reply to the comment left by "Romain " at "15/08/2013 - 15:13":

You are right of course no one can take away a tenant legal rights. The fact that the landlord would have the ADR in his favour & that the tenant chose not to take part in a scheme, that was put in place for his protection and to prevent the need for him to pay for legal action, would not help his case.

In my experience the tenants who disappear are those who know that they have no money to come back from the deposit - why would a tenant walk away from several hundred pounds?

Follow me on Twitter@landlordtweets

My book, where I warn about the storm clouds that are gathering for landlords is here >>> http://www.amazon.co.uk/dp/1484855337

Romain Garcin

15:47 PM, 15th August 2013
About 5 years ago

Reply to the comment left by "Mary Latham" at "15/08/2013 - 15:30":

I don't think that we can say that the landlord would "have the ADR in his favour": The ADR would just have sent the money back to him as it would have nothing to decide on.
So I think that this would have very little impact on a court should the tenant decide to sue.

Of course I agree that tenants disappearing in such way likely know that liable for something. My point is that landlords should keep records of everything because if the tenant suddenly gets back at the landlord 5 year down the line and the landlord no longer has evidence, he'll likely end up in a tight place.

Mary Latham

16:34 PM, 15th August 2013
About 5 years ago

Reply to the comment left by "Romain " at "15/08/2013 - 15:47":

I could not agree more the shell that protects the exposed backs of landlords is made up of the many layers of paper that prove us innocent.

Follow me on Twitter@landlordtweets

My book, where I warn about the storm clouds that are gathering for landlords is here >>> http://www.amazon.co.uk/dp/1484855337

David Sweeney

22:16 PM, 15th August 2013
About 5 years ago

Read your links Mary, well 2 of them, but they do not seem to validate you assertion that if a landlord does not take court action within X months the deposit will be returned to the tenant by default. If the landlord fails to respond to the scheme - then yes that is possible, but not if he does respond with "no I don't agree to ADR". If my understanding is wrong - tell me - but as I see the situation right now this is the scenario:

I can not check DPS because the site is down, but I know that if a dispute is lodged the deposit will be frozen until ADR or court action results in a decision. A continuing theme through this post though is that the landlord is not obliged to be the one initiating the legal action and unless the landlord has a watertight claim, the tenant has more impetus to commence a claim than the landlord.

I accept My|Deposits state that the landlord must notify the scheme whether they want to use ADR or the Courts, but it does not say that the landlord must be the one initiating court action.

TDS state that the landlord must make a decision whether to use ADR or the courts, They will take a landlords silence as an acceptance of ADR but again, he can say to the tenant “sue me”, the scheme places no obligation on the landlord to commence proceedings.

Likewise Capita will take a landlords silence as acceptance of ADR.

I accept in all 4 schemes that if ‘court’ is chosen then the landlord will not see any deposit money until a court makes a decision, so it is in the landlords interest for court proceedings to take place, but that does not mean he is obliged to commence those proceedings. However, with the insurance based schemes what is there to stop a rogue landlord just not submitting the deposit to the scheme once a dispute is lodged? Not a lot. What can the tenant do other than sue? Ok, the scheme would probably refuse to protect any future deposits but there are always other schemes.

Why would a landlord be willing to leave a disputed deposit with a scheme? Let’s assume relations between landlord and tenant have not been good. Then let us assume we have the time to take a psychology degree.
.

Anthony Altman

22:56 PM, 16th August 2013
About 5 years ago

The burden of proof is on the landlord fine if that burden of proof is reasonable but that depends on the terms of reference that the adjudicators are required to abide by
Simply put if you allow me to fix the terms of reference i will rig the outcome" any outcome you want"
case in point
A landlord brought this case to me one female tenant 1 bed flat brand new bed at start of tenancy at end of tenancy badly soiled bed so bad it had to be replaced landlord told tenant they would be charged tenant admitted soiling bed agreed to pay
After talking to her pals changed her mind wanted to go adjudication landlord agreed thought he had nothing to fear
Landlord did all the right things full check in check out inventory lots of photos invoice for bed at start of tenancy proof bed was delivered invoice for new bed landlord even kept old bed as evidence open and shut case you may think i tenant 1 bed 1 flat oh no
Tenant not required to say where she slept or even if she had not slept for the full year of the tenancy tenant not required to prove anything tenant simply wrote let landlord prove i slept in that bed tenant won
As we all know the only way the landlord could prove that female tenant had slept on that bed would have convicted him of harassment and had him placed on the sex offenders register
Any fair reasonable and just procedure would have looked at the balance of probability and asked the tenant where?they were sleeping or how they managed to go without sleep for a year they may even have asked how a brand new bed that had not been slept on for a year got so badly soiled
Not the ADR
As I said those who fix the terms of reference and burden of proof fix the outcome

David Sweeney

23:10 PM, 16th August 2013
About 5 years ago

I think we have to accept that courts and ADR sometimes don't make decisions we like.

Earlier this year I was in court against an ex tenant who had left mid-fixed term seeking just short of £5k in rent and damages.

I think I am reasonable and I think I know the law. I walked out of that court room with a victory of £164. Roughly the cost of my petrol.

I know the judge was wrong, I had case law he ignored, he dismissed a claim against a guarantor for no reason and he didn't question me on a single piece of my comprehensive evidence. He just didn't like me - Mr Nasty Landlord. This was an LHA property and his main comment was along the lines of "it wasn't perfect when they moved in" - no but it had had a new kitchen, new carpets and £2k of exterior work done since then.

I couldn't be bothered appealing as T was on LHA and principle had already cost me enough.

I don't write this as a 'woe is me' but just an illustration that no matter how watertight your evidence is in any scenario - things don't always go as you expect.

Yvette Newbury

23:12 PM, 16th August 2013
About 5 years ago

..am I getting the impression that the overwhelming opinion of landlords that have experience of ADR is that it is not worthwhile, is likely to go against them and a landlord should instead refuse and opt for court action?

Anthony Altman

23:16 PM, 16th August 2013
About 5 years ago

Unfortunately most cases go exactly as I expect
But I dont expect justice

Anthony Altman

23:19 PM, 16th August 2013
About 5 years ago

Yes the advantage of court action is you can look them straight in the eye whilst you are being shafted

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