Sharp rises in subscriptions will kick in shortly for agents using the Tenancy Deposit Scheme, as a new charging system comes into force.
This will mean no more flat fees, with subscriptions varying from firm to firm. Exact details will be announced in January.
The changes are because of the huge rise in disputes having to be determined by the Alternative Dispute Resolution (ADR) service also offered under the scheme. As reported, all external case examiners, who are a mixture of freelancers and contract workers, have already been dispensed with. Altogether, some 70 posts were affected, leaving a team of just 12 case examiners in-house – despite the escalating number of disputes.
As a result, disputes are likely to take longer to be resolved, although a spokesman for the scheme said this may not necessarily be the case.
Subscriptions for agents will now be determined on what the scheme describes as a fairer basis, which will reflect individual firms’ use of ADS.
John Hornsey, chairman of the board of The Disputes Service, which runs the TDS, said: “We are moving to a charge which will be based on the number of live tenancies and with discounts and uplifts to members that will reflect the number of cases referred. We shall base our calculations for subscription increases on this method.”
The board says that under the new system and despite the likely severity of the subscription increases, letting agents registered with TDS will be able to control their costs of deposit protection and still be able to off-set the cost. That is because scheme rules and the legislation allow agents to pass on the cost to landlord clients.
“This major change in the method of charging also means that agents should start checking their own tenancy schedules sooner rather than later to ensure that all tenancies that have ended are also closed on the TDS database.
“Under this new system it will be the agent’s responsibility to ensure that they are only charged fees on live tenancies,” Hornsey added.
Authorising the principle of a significant rise in subscriptions, the board pointed out that TDS is a not-for-profit organisation and that the very substantial rise in the number of disputes will reach a level that is well above the resources available to the scheme if
subscription income does not rise in proportion.
In many cases, the board said, disputes could, and should, be resolved directly by members, out of petty cash if necessary.
For instance, it was felt that it could not have been worth the postage, let alone the letting agent’s time, to refer a dispute of £4.20. Yet this has happened.
TDS chief executive Lawrence Greenberg said: “The £4.20 dispute is the lowest so far but we have had many for not much more.
“This kind of misuse of the adjudication process is the overwhelming reason why the cost of dispute resolution has increased by nearly 100%. This, more than any other cost increase we have experienced, accounts for the level of subscriptions we will have to consider for next year.”
However, Greenberg added: “Given the divergence in the way disputes are put forward by different firms, it is likely that the new rates will be much fairer as they will be set at different levels based on the past history of a firm’s demands on Alternative Dispute Resolution.”