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Deposit disputes hit record high
Deposit protection schemes have
been forced to resolve record numbers
of deposit disputes according to the
latest government figures.
Between March 2015 and 2016, there
were 28,100 disputes resolved by the
three government-approved deposit
protection schemes, according to the
Department for Communities and
Local Government.
This may be the highest number ever
recorded, however, it only represents
0.82% of the total deposits now
protected by the Deposit Protection
Service, Tenancy Deposit Scheme
(TDS) and mydeposits.
The latest government figures
detailing the number of deposit
disputes between tenants and
landlords are largely positive, according
to the Association of Independent
Inventory Clerks (AIIC).
The AIIC says that this is positive news
which indicates the huge number of
deposits that have been protected
since 2007. However, the organisation
concedes that more work can be done
to reduce the proportion of deposit
disputes even further.
TDS reports that cleaning features in
57% of all claims it deals with, while
damage to fixtures and fittings is
mentioned in 51% of cases.
"The issues of cleaning – or a lack of
it – and damage in rental properties
come up time and time again at the
end of tenancies, and it's clear that
these problems are responsible for a
high number deposit disputes that do
occur," says Patricia Barber, Chair of
the AIIC.
"If landlords make sure tenants
are issued with a detailed and
thorough inventory at the beginning
of the tenancy, then it's easier for
all parties to determine the
condition of the property when the
contract finishes."
"This in turn makes it easier for
landlords and tenants to agree on any
required deposit deductions which
could lead to fewer formal deposit
disputes."
Barber adds that the AIIC is pleased to
see that deposit disputes account for
just a fraction of all protected deposits.
She says, however, that this percentage
could be even lower if damage and
cleaning problems are resolved before
they are taken further.
"In the event that a deposit dispute
does occur, the deposit protection
schemes are likely to place more
weight on inventories and check out
reports that have been produced
independently and professionally,"
concludes Barber.
The AIIC is a not-for-profit
organisation with 750 members. It
provides a range of training solutions
for inventory clerks, landlords and
letting agents.
Holiday lets breach freehold lease terms
Millions of property owners using
short term letting sites, such as Airbnb,
may be breaching their lease terms,
according to a recent ruling from the
Upper Tribunal, a superior court with
equivalent status to the High Court.
The ruling, which may set a precedent,
was made after a woman fell out with
her neighbours in a development in
north London, when she let out her flat
via Airbnb and other similar websites.
Residents asked the freeholder of the
block to act and the case went to court.
Judge Stuart Bridge who was
overseeing the case ruled: “In order for
a property to be used as the occupier’s
private residence, there must be a
degree of permanence going beyond
being there for a weekend or a few
nights in the week.”
“Granting very short term lettings
(days and weeks rather than months)...
necessarily breaches the covenant [not
to use the property as anything other
than a private residence].”
Set up in 2008 in San Francisco, Airbnb
now has over two million homes and
rooms available for rent around the world.
This new ruling means that potentially
thousands of UK Airbnb residents and
occupiers of leasehold properties who
have leases that state the property must
be used as a ‘private residence’, may
now be prevented from renting out their
homes for short term lets.
Bernard Clarke, spokesman for the
Council of Mortgage Lenders has said:
“Most lenders do not allow borrowers to
offer short-term lets on their properties,
whether on an owner-occupied or buyto-let mortgage."
Adam Keith, Manager, Transactional
Liability at Pii comments: “This new
ruling could potentially prevent a vast
number of property owners in leasehold
properties from conducting short term
lets. This is particularly an issue in London,
where there is a large number of leasehold
properties and growing demand for short
lets from tourists, contractors, casual
workers and overseas students.
“Any investors, buy-to-let landlords
or homeowners considering taking
advantage of the Airbnb market, should
think hard about the legal implications.
They may find that they are restricted
to longer term rentals and may fall foul
of the law if they become Airbnb hosts.
This has real legal repercussions and,
in the very worst case scenarios, could
14 Landlord & Buy-to-Let Issue 69 • November 2016
result in the forfeiture of the lease and
the loss of the property.
“The implications of this new ruling are
significant. Not only is there the potential
that mortgage companies may pull the
finance in the event of a lease breach, but
insurers may refuse to pay any claims. If
property owners fail to tell their insurers
that they are letting out their property
on short term lets, their insurance could
be potentially null and void.
“In essence, property owners who fail
to inform their buildings and contents
insurer about their short-term lets are
potentially putting their property at
risk. Should a claim need to be made for
the building itself or the contents, the
owner may be in for a big shock. There
is a high likelihood that the insurer will
refuse the claim.
“Though Airbnb does provide limited
insurance for damages up to £600,000,
there is no cover for household contents,
buildi ng insurance or breaches of the
lease. If Airbnb hosts are concerned
about their cover, they should contact
their insurers.”
Pii is an independent property
insurance broker across the UK and
continental Europe.