A campaign group has demanded that the government closes a loophole that allows “unscrupulous landlords to run off” with their tenants’ security deposits.
The call from Generation Rent follows the case of Daniel Burton, a rent-to-rent landlord who was expelled from a tenancy deposit protection scheme.
The scheme allowed the landlord to keep his tenants’ deposits, which meant that they were not protected when he was expelled from the scheme and subsequently went bust, owing 160 tenants around £140,000.
A Channel 4 News investigation revealed that Burton’s business, Unida Place, sub-let rooms to renters and went into liquidation in August 2013, leaving many of its tenants out of pocket.
Burton promised to pay the money back in November, but some tenants are still waiting to be reimbursed, according to the report.
Generation Rent says that the case raises serious doubts about the effectiveness of government-backed tenancy deposit schemes.
While one of the three different schemes provides the option to hold the tenant’s money in a neutral account, the two other schemes, including MyDeposits, run by the National Landlords Association (NLA), allows landlords to keep the money, in return for insurance payments.
If the landlord fails to comply with the scheme, such as in Burton’s case, the insurance becomes void and the deposit is not protected.
Generation Rent wants the government to review the deposit protection system to ensure that tenants’ money is not put at risk should their landlord fail to comply with the rules.
And it is also calling on the NLA to pay back any money that has not been adequately protected.
Generation Rent additionally wants a national register of landlords to ensure that all tenants can check if their landlord is bona fide and legitimately letting the property.
Alex Hilton, director of Generation Rent, said: “More than two thirds of renters have no choice but to rent privately, which means they are easy prey for unscrupulous landlords and letting agents who enjoy Wild West levels of regulation. What regulation there is – to protect tenants’ deposits – now appears to be flawed. The nine million people living in the private rented sector deserve a market that works for them, instead of exploiting them.”
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