On 24 August 2018 the Office for the Environment and Infrastructure announced that a new deposit protection scheme will be planned before the end of 2018. The announcement follows news that a local estate agent has ceased trading, leaving some tenants and landlords uncertain of their position with regard to rents and deposits that were being held by that agent.
The proposal is likely to be that Guernsey should introduce a scheme which is similar, if not identical, to the scheme already in place in Jersey.
This article provides a brief explanation of how the new scheme would operate.
The Guernsey scheme would likely require a landlord taking a deposit to enter into an agreement with the state's appointed administrator – in Jersey called 'mydeposits' – and place any deposit monies with the administrator within 30 days of commencement of the lease. Any landlord that fails to comply would risk being fined.
A rent deposit protection scheme does very much what the name implies. Deposits are protected for the duration of the lease and will be returned as long as the tenants:
- have complied with the terms of the lease;
- have not damaged the property; and
- have paid their rent and any bills.
Deposits are transferred to a regulated bank and held there so that tenants are protected if either their landlord or their landlord's agent goes out of business.
In addition to knowing that a deposit is safe, it is equally important to know the mechanism for resolving any disputes (eg, when tenants fall behind on their rent or fail to properly maintain the property). While in some cases it is clear that all of the deposit should be handed over to the landlord, where only a part of the deposit should be withheld, the Guernsey administrator would likely provide a free dispute resolution service, as is the case in Jersey. Either party would be able to take the matter to court – for example, if the landlord's losses are greater than the deposit.
In Jersey, letting agents can become members of mydeposits so they that can pay in and manage deposits on behalf of landlords. This would also likely apply in Guernsey.
Tenants are given further protection under Jersey law, which will likely also apply in the Guernsey scheme, including a right to a copy of the signed lease and a receipt, as well as a right not to pay full rent if part of the accommodation becomes uninhabitable.
Further, the Guernsey scheme would likely require leases for self-contained accommodation to include certain information, which is normally contained in any properly drafted lease. A compliant lease must also clearly set out that a tenant can remove anything that has been affixed to the unit, provided that any damage caused by said removal is fixed. For example, leases can specify that anything that has been affixed to the premises becomes the landlord's property.
Jersey's law has changed its position with regard to evictions and stays of eviction. It remains to be seen whether the Office for the Environment and Infrastructure will propose that Guernsey's law should also be changed.
The deposit protection scheme has clear benefits for both landlords and tenants; however, as good as it may be, it is unlikely to solve every problem. For example, the law may not provide protection where a landlord or agent ceases trading before placing the money with the scheme. Any such scheme would need be run efficiently so that tenants could have their deposits returned promptly at the end of the lease, as they may need them to rent another property.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.