Will PPI Companies Start Chasing Tenancy Deposits?

As the PPI deadline looms, could these companies switch their business models to chasing tenancy deposits that weren’t properly protected?

A new study of more than 1,000 Britons in the UK’s private rental sector has uncovered a worrying lack of knowledge surrounding tenancy deposit laws and tenants’ rights when a landlord does not comply with the rules.

As such, JustLandlords has asserted their belief that PPI companies may latch onto this naivety and chase the substantial rewards that tenants can claim when their landlord is non-compliant.

Under the Housing Act 2004, landlords in England and Wales must protect their tenants’ deposits in one of the three Government-approved schemes. If they don’t, they could be liable to pay the tenant up to three times the amount of the initial deposit, plus the full deposit amount.

When respondents were asked how much of the original deposit the tenant could claim for when they leave the property, if the landlord has not complied with the law, just 2% could correctly identify the right answer – three times the amount, plus the deposit. This means that a staggering 98% of those involved in the private rental sector do not understand tenants’ rights.

Perhaps even more worrying is the fact that, of those aged 55+, 70% thought that the maximum amount available to a tenant was the full amount, plus their deposit. This age group includes some of society’s most vulnerable renters, whom may be at risk of being taken advantage of by rogue landlords. Landlords, too, must be aware of the law, as they could face large fines and significant payouts to their tenants if they do not comply.

JustLandlords’ study also asked respondents where a tenant’s deposit should be kept during a tenancy. The majority (66%) could not identify the correct answer (being with a Government-approved deposit protection scheme) and, amongst those aged 18-24, the number of correct responses dropped to just 16%. This should ring major alarm bells, as most 16-24-year-olds (65%) live in rental accommodation. Worryingly, they may be missing out on money that they are legally entitled to.

8% of respondents believed that the deposit was held in the landlord’s personal bank account, while almost a quarter (24%) thought that the letting agent looked after it.

Following the PPI scandal of recent years, the survey also looked at whether or not attitudes to consumer rights, particularly tenants’, had changed, and whether or not Brits are more or less likely to look into which processes should be followed. 37% said that it had not made any difference to their attitude towards their consumer rights, with just under three-quarters (74%) saying that the PPI scandal hadn’t changed their awareness when it came to reading the terms and conditions of a signed agreement.

Rose Jinks, the Spokesperson for JustLandlords, comments on the findings:

“It’s shocking that so few people understand their rights when it comes to tenancy deposits, especially as more people than ever rent from a private landlord. We believe that the companies currently seeking PPI compensation for consumers may turn to unclaimed tenancy deposits when the deadline comes into force in August next year."

“Tenants may find that they could claim back three times their deposit, plus the original deposit amount, if their landlord didn’t comply with the law, while landlords could be faced with a significant bill. We urge all of those in the private rental sector to understand their rights and responsibilities surrounding tenancy deposits.”

What are your thoughts as to the current legislation governing rental deposits? Is it excessive to ask a tenant to endure paying three times the sum, plus the original deposit monies, or does it merely highlight a need for further information to be provided to tenants?

Please feel free to comment and let me know your thoughts.

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The view expressed herewith is exclusively my own, and not those of my employer. The contents of this article is not legal advice and should not be relied upon as such. Please note no attorney-client relationship shall be formed should any adverse consequence arise from reliance upon the information provided within this article.