Third Party for Holding Rental Deposits

paul71

I am sure everyone has noticed the large number of threads where people have complained of landlords withholding deposits. Many of the compliants validly point to the filmsy excuses being given for with-holding the deposits, but therein lies the truth of the matter, many landlords are probably not repaying deposits because they simply do not have it.

It raises the question of the desirabilty of a third party to hold the deposit. I would be hesitant to recomend solicitors as my thrust in their ability to manage their client accounts has been effected by several recent high profile cases, and having rented for several years myself I have always refused to pay a deposit to a letting agent as you simply cannot know what their liquidity situation.

Any Ideas?

Victor

It needs to be a single, independent third party. The obvious choice in the PRTB.

paul71

I agree the PRTB seems to be the obvious solution victor. Independance is the most obvious concern but liquidity is also an issue (they won't go bust leaving tenants and landlords high and dry) and in that respect a state body would address my concerns.

My only gripe is that the PRTB would have to be expended to cope with the extra workload and in the current climate it is hard to justify the expression of a quango when A&E departments are closing.

UDP

The situation is ridiculus in Ireland. In Germany where I have lived a special bank account is setup for this.

There are two simple reasons for using a separate bank account (there may be other good reasons too):
1. The tenant should always receive the interest accrued on their deposit - not the landlord since it is still the tenants money.
2. Should the landlord go bankrupt etc your money will be safe from their creditors. At present if a landlord goes bankrupt the tenant can lose his/her deposit if it is mixed with the landlords' general funds which I suspect is the way it is most of the time.

Has anyone ever tried to setup a bank account for this?
Would landlords accept this as I will definitely be trying to set this up the next time I move?

I dont think there is a need for PRTB involvement. Although there should be something setup whereby if there is a dispute raised then the PRTB have the right to put a block on either party accessing the funds from the bank account until they make a ruling. Even if something like this is not setup people should be at least using separate bank accounts for deposits.

Milk & Honey

Victor wrote: »

It needs to be a single, independent third party. The obvious choice in the PRTB.

How long do you think it would take to get deposits back from the PRTB? Most tenants get their deposit on the way out the door. To get it back from the PRTB would involve form filling and waiting for verification.

quietsailor

UDP wrote: »

The situation is ridiculus in Ireland. In Germany where I have lived a special bank account is setup for this.

There are two simple reasons for using a separate bank account (there may be other good reasons too):
1. The tenant should always receive the interest accrued on their deposit - not the landlord since it is still the tenants money.
2. Should the landlord go bankrupt etc your money will be safe from their creditors. At present if a landlord goes bankrupt the tenant can lose his/her deposit if it is mixed with the landlords' general funds which I suspect is the way it is most of the time.

Has anyone ever tried to setup a bank account for this?
Would landlords accept this as I will definitely be trying to set this up the next time I move?

I dont think there is a need for PRTB involvement. Although there should be something setup whereby if there is a dispute raised then the PRTB have the right to put a block on either party accessing the funds from the bank account until they make a ruling. Even if something like this is not setup people should be at least using separate bank accounts for deposits.

In a perfect world it would be the PRTB as they already are dealing with the issue of deposits, unfortunately this is Ireland, as a tenant you can expect a delay of 3-6 months to get anything back if there rate of replying to queries is anything to go by (personal experience)

As for the bank account can you tell me more about that. I already have a current account set up to deal with the house I rent - all deposits and rent goes in, all mortgage payments, utility payments, revenue payments and repair costs come out of it.

1. Is the german idea like this or just for the deposit only?
2. Is it an escrow type account - both parties have to agree to let the funds be withdrawn
3. Who pays the bank fees - Landlord or Tenant?

UDP

quietsailor wrote: »

In a perfect world it would be the PRTB as they already are dealing with the issue of deposits, unfortunately this is Ireland, as a tenant you can expect a delay of 3-6 months to get anything back if there rate of replying to queries is anything to go by (personal experience)

I dont think the PRTB would be in a position to deal with such money - it would make much more sense for a bank to do that with the PRTB possibly having powers to block money from being withdrawn in the event of a dispute.

quietsailor wrote: »

As for the bank account can you tell me more about that. I already have a current account set up to deal with the house I rent - all deposits and rent goes in, all mortgage payments, utility payments, revenue payments and repair costs come out of it.

1. Is the german idea like this or just for the deposit only?
2. Is it an escrow type account - both parties have to agree to let the funds be withdrawn
3. Who pays the bank fees - Landlord or Tenant?

1. The german method is basically a savings account setup solely for the tenant so that any interest that is accrued stays in the account and the tenant then withdraws the entire amount when the tenancy ends i.e. deposit plus interest. This is because in Germany the law says deposit monies must be set aside from the landlords' finances.

2. EDIT: From what I can see it looks like it actually is like an escrow account as such which would actually be fairer since both parties will need to come to an agreement before either party can withdraw the funds but I think they actually just use savings accounts in the tenants name

3. There would be no bank fees since it is a savings account. I was dealing with BOI last week who informed me that there are no fees on savings accounts unless they have a passcard.

I see BOI do Escrow accounts for businesses - I wonder would they be willing to do them for landlords/tenants.

EDIT: I see that the PRTB have already been looking into this in 2007 with a report published here (page 39 talks about rent deposit accounts):
http://public.prtb.ie/DownloadDocs/PRTB%20Deposit%20Retention%20published%20version.pdf
Considering that was over 4 years ago it doesn't look like they got anywhere.

quietsailor

@ UDP

Thanks for that link. I think I might start using an escrow account in future, avoids any hassle or accusations.

I can see difficulties though where the tenant is a foreign student - I have a lot of Erasmus students staying with me. ESB/Bord Gais/Airtricity will need to make their online billing more user friendly and instantaneous for escrow to work -- You need to take the meter reading, submit it online, get some sort of a bill either emailed or there online on the day the tenant is leaving so you can show something to the tenant and get all bills and deposits sorted out.

It'll work fine for Irish tenants though as they'll be staying in the country so you can contact them again easily.