September 30, 2010

Changing the Law…but Changing Nothing

Posted in Law, London at 2:08 pm by Paul Sagar

There is no requirement for letting and estate agents in Britain to be part of a regulatory body. This means any cowboy who chooses can set up shop. And many do.

Since 2007, however, tenants have in theory gained peace of mind. It is now illegal for letting agents not to register tenancy deposits in a licensed Deposit Protection Scheme (DPS). Failure to do this entitles tenants to a compensatory sum of three times the original deposit, should this a) not be returned at the end of a tenancy and b) not have been placed in a DPS.

Has this prevented dodgy letting agents from continuing that age-old practice of stealing tenant’s original deposits?

Not exactly.

Imagine you leave a property – without causing any damage – and apply to your letting agent for a return of your original deposit. Imagine they refuse. Imagine you then ask for proof that they registered your deposit in a DPS. Imagine they can’t do this, because they didn’t. Imagine they persistently refuse to return your money nonetheless.

What happens next? Do you assume you’ll be able to straightforwardly take the agent to County Court, getting both your money and legally-entitled compensation in due course?

Think again.

To try and get your money back you must start by sending a claim form to county court, explaining that your agent has breached both your original contract and also the obligations of the Housing Act (2004). The Court then writes to the agent.

But imagine the agent opens the court’s letters, re-seals the envelopes, writes “gone away” on the front, and returns the documentation pretending the business has folded. When you go to the agent and try and serve them a claim form in person, they refuse to accept it from you.

What next?

Sensibly, you press for a county court hearing to rule on your dispute with the agent, which is granted. But the agent doesn’t turn up to the hearing. So you win the judgement by default. The agent now owes you three times your original deposit value – a sum likely to be in the thousands. Will you get your money now?

Not likely.

The Court sends the agent an order demanding that they pay you the money that is now legally yours. But imagine the agent sends this order back, again writing “gone away” on the envelope (which is a lie, because they are still trading). At this point you might expect the court to take matters into its own hands so as to extract the money owed.

You’d be wrong.

There are now three options. 1) You can send in bailiffs to take the agent’s property up to the value you are owed. However bailiffs cannot take property essential to the business’ operations, so if you’re dealing with a shoe-string agency (as is likely) the bailiffs will be able to take very little and almost certainly nowhere near the sum you are owed.

2) You can file to have the business declared bankrupt. The problem with this is that it is likely to be expensive, and if anybody else is owed more money by the agent than you are, they will get paid first (and as you’re dealing with a dodgy letting agent this is quite likely).

3) You can attempt a third party debt order, whereby an income stream intended for the business is diverted into your bank account instead of theirs.

Let’s say you (sensibly) try to pursue option 3). However you can only do this if you secure key information, such as the businesses’ bank account details. The only way you can get this is by having the business attend court for questioning. To make that happen, you need to serve a notice-to-attend-court to the manager of the business personally, and then swear an affidavit to the court that you did so.

Now imagine that the manager avoids you for several weeks. Imagine that bailiffs are no use because they cannot track down the manager personally, and the papers have to be served that way. But imagine you eventually pin-down the manager at work one day, give him the papers, then swear an affidavit accordingly. Are you any closer to getting your money?

No.

Because now imagine the agent writes to the court and lies, saying that the manager has left forever. The court (somewhat reassuringly) says this is not acceptable, and the court date for questioning goes ahead regardless. But the manager (unsurprisingly) doesn’t turn up. A judge then issues a Suspended Committal Order. This means that if the manager does not turn up to a second hearing, a warrant will be issued for his arrest.

Is the process over? Is your money on the way?

No, because you have to serve the Suspended Committal Order to the manger, personally. The Court won’t help you do this. But the manager knows who you are, and isn’t going to let you do that. So are you going to get your money back? It really doesn’t look like it.

Imagine over a year has now passed. Imagine you are an Oxbridge educated British citizens whose first language is English and whose current flat mate just qualified as a solicitor. Would you conclude that the much-touted Deposit Protection Scheme has done anything whatsoever to rebalance power between tenants and dodgy letting agents? Do you think that vulnerable people with limited resources, who may struggle with reading English and legal documents – i.e. the worse-off, who are most likely to be at the mercy of dodgy letting agents – are better protected than before, let-alone the highly educated and better-resourced?

I think the evidence speaks for itself.

But there’s a wider lesson here, too: for those (like me) with faith in the power of the state to improve society, we must nonetheless remember that simply changing laws does not necessarily guarantee the good consequences we desire.

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