How long can DPS keep a deposit for during a stalemate?

by Readers Question

3 years ago

How long can DPS keep a deposit for during a stalemate?

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How long can DPS keep a deposit for during a stalemate?

I had a dispute last year with my two tenants over the return of their deposit where they wanted a higher rent abatement than I offered them for some major bathroom works that was done while they were there. They therefore failed to pay some rent in their last month. How long can DPS keep a deposit for during a stalemate

When they moved out, I retained some of their deposit to cover this rent and they raised disputes with DPS where the deposit was registered. I had to send cheques to DPS for the respective amounts. I dealt with one using the ADR service (which I was successful on), and the other I opted out of the ADR service (so it would have to be dealt with in court).

However, the tenant for the outstanding deposit is a barrister and I imagine I would have a long and tedious battle through the courts over this deposit, which I don’t have the time or inclination for now. Likewise, she doesn’t appear to be taking any action either, perhaps because she knows the other tenant lost. So, it’s now a stalemate. Neither of us have the benefit of the money because it is now with DPS, and DPS won’t release it without a court order.

How long realistically can DPS keep the money? Surely it can’t be forever, because the money is effectively in limbo and would have to go somewhere eventually once both I and the tenant are dead and/or DPS is wound up. Where would the money go then? Also, many records are destroyed after 6 years with most companies.

There must be a time limit on holding this money if neither party makes a claim. Then surely, after this time limit, it must be released to whomever asks for it first, me or the tenant. Or perhaps by way of a simple court order at that point.

Hypothetically speaking, if I and the tenant did die, when and where would the money go then? Would it go to my estate, the tenant’s estate, or become the property of DPS eventually?

Looking forward to reading your replies.

Regards

Jason



Comments

Mark Alexander

3 years ago

Hi Jason

I don't know the answer so I have just tweeted ...

Hi Jason

You raise a very interesting question. I want to start by saying that I don't know the answer for sure so take the below with a pinch of salt...

The starting position has to be that the deposit is due back to the tenant. As the landlord, it's up to you to show that a valid deduction has arisen. In the absence of this, the deposit should be returned.

With this in mind, the question becomes, how long do you as a landlord have to claim against the deposit?

I posit that the normal rules of limitation would apply. You have 6 years to claim against the deposit and after this point, you are barred from making a deduction. Following this logic, the tenant could wait 6 years and then apply to the scheme to have the money released.

I can also imagine the reversal of this argument. Consider the situation where a tenant turns up 6 years and one day on from the end of the tenancy and asks, for the first time, for the deposit to be returned. I can imagine a landlord putting forward the argument that the tenant is barred from claiming the deposit back. This doesn't really fit your fact pattern though.

A third dimension would be to look at the situation from the schemes point of view. They are holding the money and are, essentially, waiting for either you or the tenant to claim this back from them. If 6 years go by and neither you nor the tenant claims the deposit back, could they say that the both of you are now barred from claiming the money from them and simply take this money?

I'm not sure a scheme would (or even could) do this. It should be noted though that there is an issue with DPS holding money it does not have a right to (http://www.depositprotection.com/documents/millions-of-pounds-of-unclaimed-deposits-are-returned.pdf) and I'd be worried about this deposit being lumped in with the rest. For unclaimed deposits at least, the approach seems to be for the scheme to return the money to the tenant.

@Mark I see you tweeted this question to the DPS. Hopefully, they can give a more intelligible answer!

As a closing thought, Jason, if you didn't want to go down the court route, why did you opt out of ADR? It seems to me that both you and the tenant would have been better off resolving this dispute. The stalemate situation you describe does nobody any good (aside from the scheme who is now getting interest on the money).

Romain Garcin

3 years ago

Interestingly, the DPS's T&Cs for their custodial scheme state that the party refusing ADR must start court proceedings within 6 months or the deposit may be released to the other party.

However, there is no such deadline in the T&Cs for the insured scheme, which just state that they'll hold the disputed amount until the parties agree or a court order directs them on how to proceed, without time limit (unless I missed it).

The caveat, of course, is that no court proceedings may be started after 6 years. What will the DPS do at that point?

Regarding the 6 year limit, my understanding is that it applies to court action: Nothing prevents the tenant to claim it afterwards as the money is still due. However, if the landlord (or the scheme!) refuses then there is really no longer anything the tenant can do.

Jason Payne

3 years ago

Thanks for the replies. It would seem that I have 6 years to make a claim before the playing field changes. And then, it may well come down to interpretation. Would DPS return the deposit to the tenant if they asked for it, regardless of whether I refused, citing the 6-year court action limit? Or would they say that it can't be returned if I refuse even though court action is no longer an option. Although the second interpretation is the correct interpretation by Romain's understanding, if they did this, where does that then leave us? It would be a perpetual stalemate, which brings me back to the original question. What happens to the money when we die or DPS is wound up?

George, as for that document about millions of pounds of unclaimed deposits, I don't think that applies here as I imagine they were for deposits where there was no dispute. This deposit has been claimed by both sides, and therefore there is a dispute. So, again, it leaves the question open.

As for why I declined ADR, it was because the tenancy agreement for the tenant had been destroyed (outside of my control), and one of the requirements for ADR is that the tenancy agreement must be supplied as evidence. The DPS guide (http://www.depositprotection.com/documents/guide-to-deposits-disputes-damages-2013.pdf) on this states: "If this document is not provided it is likely that the landlord’s claim will fail because the adjudicator will be unable to establish the obligations agreed between."

By taking this to court, a judge is not restricted by the above posit and will accept the tenancy agreement as evidence from either party, and the tenant would of course produce it in their bundle of evidence. The above DPS statement is more specific and constraining.

Neil Robb

3 years ago

Hi

You state the lady is a barrister. My first Thought is a barrister that does not pay their rent why not take her to small claims court for outstanding rent. Joint tenancy they are both liable for outstanding amount while there claim for damages that your where taking from deposit. I don't think a barrister with CCJ's is a good thing and may prevent them operating. Probably wrong but I would imagine sometime in the future they will want a mortgage and they would need to declare CCJ.

Just a thought might help. resolve your situation. I totally dislike the deposit scheme and rarely use it. I have better things to do with my time.

Jason Payne

3 years ago

Reply to the comment left by "Neil Robb" at "15/03/2015 - 13:11":

I agree. But that's another issue really. The point of the question was to understand what would happen if I decided not to do that to save myself time. Ideally, I would do nothing, and the money would become mine upon request after a certain time period (such as 6 years), but that's what I posted to question to find out - how does it work.

With no definitive answer, I will probably resort to pursuing her through the small claims court. Be aware, though, that a successful claim against her does not mean she'll have a CCJ. She only gets a CCJ if she fails to comply with the order to pay.


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