No-win, no-fee firms set sights on landlords

No-win no-fee companies are actively approaching tenants and encouraging them to claim against landlords who haven’t protected their deposit.

If there’s a bandwagon to jump on, you can bet your last pound that ambulance chasers will be on it. Firms offering to fight your corner – for a fee of course – have long encouraged people to make claims for mis-sold PPI, unfair bank charges, wrongly-banded Council Tax, and accidents that weren’t their fault.

The latest target of these firms is landlords who have failed to protect tenants’ deposits in a recognised scheme.

So, if you’re a tenant could you reclaim compensation for an unprotected deposit? Should you? And if you decide you want to, is a no-win no-fee firm the right route to go down?

Tenant deposit rules

Compulsory deposit protection schemes were introduced in 2007 to offer an arbitration process to landlords and tenants disputing the return of a deposit at the end of a tenancy.

Under the scheme landlords signing tenants to an Assured Shorthold Tenancy (AST) that began after 7th April 2007, and taking a deposit from the tenant, must protect the deposit in a Government-backed scheme. They have 30 days to do this and must tell the tenants which scheme it’s in via the “Prescribed Information” provided by the scheme.

Landlords now have four schemes to choose from: The Deposit Protection Service (DPS), My Deposits, The Disputes Service (TDS) and Capita.

Landlords who break the rules can find themselves in court and be fined up to three times the deposit amount, which is awarded to the tenants as compensation.

Ambulance chasers

A quick online search reveals several companies offering to help tenants make claims against their landlords.

These include Ernest Advice, the Tenants Deposit Claimline and Tenancy Deposit Claims.

These companies typically charge 25% plus VAT of any compensation awarded.

The Tenants Deposit Claimline (which uses the catchy strapline “don’t wait ‘til you vacate, claim now before it’s too late”) reckons 92% of tenants who have filed a claim through it have been successful

As well as targeting tenants whose deposit hasn’t been protected, these firms are encouraging tenants with protected deposits to scour the paperwork with a fine toothcomb and make a claim against the landlord if there are any mistakes.

Should you make a claim?

If you landlord hasn’t protected your deposit, then the sensible thing is to ask him or her to do so. If they refuse or fail to do so it may be worth taking action. However you don’t need a firm to help you. You can hire a solicitor and take your landlord to court yourself.

In theory, claims can go back as far as six years and be against ex-landlords, but I’ve yet to see evidence of a historical case succeeding, despite what the ambulance chasers claim.

If you know your landlord or ex-landlord has protected your deposit, but not sent you all the Prescribed Information, you should think carefully before making a claim.

Firstly, if you know your deposit’s safe, or you’ve had it returned via a deposit protection scheme at the end of a tenancy, you might take the view that he or she has done the right thing albeit not with the all the right paperwork.

The risk of eviction

If you’re still living in the property bear in mind that taking your landlord to court will undoubtedly sour the relationship. If the fixed term of your contract has expired, and the landlord needs to give you just two months’ notice to leave, don’t be surprised if he or she evicts you in retaliation. I wouldn’t expect a reference either.

And if you don’t win the court case for some reason you might find yourself forking out court fees and homeless to boot.

A better plan of action might be to wait until the tenancy ends and then take action if you don’t get your deposit back. If at this stage it’s still not protected you could proceed to court action and go for compensation.

As for historical cases where the deposit has been returned and accepted, but it either wasn’t protected or the Prescribed Information wasn’t 100% correct, it’s a gamble as to whether courts will favour opportunist claims.

It’s worth taking a moment to think what will happen if thousands of landlords are forced to pay compensation to former or current tenants regarding deposits.

Landlords will need to recoup the loss somehow and the obvious solution is to increase rents. With rents rising anyway, and tenants finding it increasingly hard to secure a property in some areas of the country, consider whether you really want this to happen.

More on renting your home:

Tenants’ rights and where to go for help

Rising number of tenants falling severely behind with rent

Rent-to-rent: The new, dubious, get-rich-from-property scheme

Deposit security: How safe is your deposit?