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Baroness Gardner of Parkes moved Amendment No. 254B:

After Clause 87, insert the following new clause--

Custodial deposit schemes

(" .--(1) A local housing authority may make and submit to the Secretary of State for confirmation by him a scheme (in this section referred to as a "custodial deposit scheme") authorising the authority or another body to register and hold all rental deposit monies charged by landlords letting properties within the authority's area.
(2) A custodial deposit scheme may--
(a) specify the information to be kept on the register;
(b) specify the person required to notify the local authority of deposits charged and to lodge deposit monies with the authority;
(c) make it a duty of such persons as may be specified by the scheme to notify the authority of the payment of a deposit;
(d) make it a duty of such persons as may be specified by the scheme to lodge deposit monies with the authority;
(e) specify the time limit within which the deposit should be lodged with the authority;
(f) make provision for the funding of the scheme through interest raised from deposits held;
(g) set down criteria for the use of interest raised for the benefit of private tenants in the local authority's area;
(h) specify the method by which tenants are to be notified of the lodging of the deposit;
(i) specify the methods by which disputes over the return of deposits are to be resolved.

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(3) A custodial deposit scheme shall not come into force before it has been confirmed but subject to that comes into force on such date as may be fixed by the scheme or, if no date is so fixed, at the expiration of one month after it is confirmed.
(4) A person who contravenes or fails to comply with a provision of the deposit scheme commits a summary offence and is liable to a fine not exceeding level 3 on the standard scale and if the contravention or failure continues, he commits a further summary offence and is liable on conviction to a fine not exceeding one-tenth of the amount corresponding to that level for every day or part of a day during which the contravention or failure continues.").

The noble Baroness said: At Second Reading I made the point that I thought that it was very desirable to have some formal place where tenants' deposits can be held. I quoted the New South Wales system as being an example where this works very well. Following that, the citizens advice bureaux approached me and asked whether I would accept this amendment which it has worded. I have accepted it and I put it forward tonight as a probing amendment. I have reservations as regards the very first line which refers to, "A local housing authority". I am not sure that such a housing authority will be the appropriate body to deal with this matter.

In New South Wales there is a specific authority called the Rental Bond Board of New South Wales which covers the whole state and which is very much bigger than a local authority here covering a much smaller number of people. I believe that a local authority would be given a great deal of additional work as the proposal is set out in this amendment.

Since I raised this matter and having tabled the amendment, I have received communication from the Small Landlords Association. I am impressed by the fact that it researched the New South Wales scheme, which I knew little about. It made the point that out of all the cases there only 0.8 per cent. were disputed. The consumer claims tribunal for settlement, which resolves who is to get the refund, awarded 16 per cent. of claims to the tenants and another 16 per cent. were fully awarded to the landlords. In the rest of the cases some kind of compromise position was taken.

I am not sure whether my amendment is of the right type or whether it would be preferable to have some kind of insurance or bonding system on behalf of letting agents. A number of them already operate such systems. My concern is about cases where no one is responsible for the money. Someone may well vanish with it. The argument about dilapidation is usually settled through inventory clerks who check in and check out and determine the exact position of a property. I do not believe that that is such a difficult issue.

It is important for people to feel that their money is safely held somewhere. Whereas in the past agents used to give tenants the benefit of the interest on the money, they now say that the cost of administration is so high that they can no longer give tenants the benefit of any interest. I note that quite heavy costs attach to the New South Wales scheme, and that has been pointed out by the Small Landlords Association. It is a disadvantage if the tenants' deposits are going to be eroded by the cost of the scheme, so there are snags to it. I have put

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forward this amendment because the principle is a good one. I shall be very interested to hear the Minister's comments on it. I beg to move.

Lord Strabolgi: I listened with great interest to what the noble Baroness said about the situation in New South Wales. In contrast to that, the citizens advice bureaux have told me that, so far as they are concerned, disputes over the return of rental deposits are one of the commonest forms of landlord/tenant disputes with which they have to deal. Those disputes are not only distressing and disturbing for their clients, but they also distort the housing market. They reduce flexibility and choice for the tenant and are a disincentive to renting out property, particularly for inexperienced landlords, and thus act to restrict the revival of the private rented sector.

Since January 1989, as we know, almost all new private tenancies have been either assured or assured shorthold. In future, they will mostly be shorthold. Many tenants pay their landlords security deposits--sums of money held as security against rent arrears, damage to property or removal of furniture. Over here there is no legal obligation for security deposits to be kept in separate accounts or to be returned with interest at the end of the tenancy--although both conditions are, of course, common practice among good landlords. It is with the landlords who are not so good that we are dealing.

Every year the citizens advice bureaux deal with three-quarters of a million housing problems. They tell me that one of the most common forms of dispute in the private rented sector relates to the return of rental deposits. Sometimes the deposits are held by an agency, as I mentioned earlier. I understand that a client in London rented a flat via an agent and paid a deposit of £750. The agency subsequently went into receivership and the client was anxious to recover the deposit. The bureau reported that the local council was concerned about the number of agents going into receivership and the number of deposits being lost.

The amendment would build on initiative by giving local authorities new powers to establish an independent custodial service for rental deposits which could be run by local authorities or other organisations. That would surely provide a value-for-money service for both landlords--good landlords--and tenants, and create greater security in the private rented sector. I therefore hope that the Government will take account of the amendment, which would be a useful innovation.

We are dealing here--this is why we are legislating--not with the good landlords, but with the very murky world of verbal agreements and all that kind of thing, where, at the end of the tenancy when the tenant is evicted because the landlord wants to try to get more rent from somebody else, although the tenant may have paid a deposit, the landlord may deny that he has ever received it or may say that furniture has been damaged when it has not been damaged. We have to deal with such cases. It would be a great advantage if such

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deposits could be held by an outside body, preferably by somebody officially appointed by the local authority. I support the amendment.

Lord Meston: I, too, wish to support the amendment--or something like it. It seems to have the potential for considerable practical value. It is encouraging to see that it is based on the considerable experience of the citizens advice bureaux. I agree with what the CAB says about the disproportionate amount of time and effort which is spent on disputes about relatively small amounts of money originally provided by way of deposit.

Turning to the point raised by the noble Baroness about the appropriateness of having the local housing authority as the custodian of the deposit scheme, it seems to me that it might be possible for local housing authorities to make joint arrangements with other bodies. Subject to those remarks, I support the amendment.

The Earl of Lytton: I support the principle that the noble Baroness raises with the amendment. However, I do not believe that what she has set out here is the right way forward. What we are talking about is landlords taking pecuniary advantage--I can put it no more kindly than that--of tenants. But the scheme must not be something that is bureaucratic or disproportionate in terms of its running costs compared to the amount being held.

I support the comments of the noble Lord, Lord Strabolgi, because I, too, am aware of circumstances where landlord management companies have gone into liquidation holding the stake, not just in connection with rental deposits, but money due for repairs and such things. There are not the proper accounting methods. The matter should be addressed, but it must be looked at in the context of the resources necessary to provide it. I should say that the Leasehold Enfranchisement Advisory Service is not looking for that task.

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