Change must wait for the scourge of the lost deposits

The Government is acquiring something of a reputation in the property industry for making last-minute U-turns.

First came the announcement that one of the central elements of the new home information packs - the home condition report - will no longer be mandatory when the packs become law in June 2007. And now the tenancy deposit scheme (TDS) - requiring landlords to hand over deposits to a third party - has been deferred by six months from 1 October to April 2007.

The TDS forms part of new legislation protecting tenants from landlords who illegally retain the deposit when the property is vacated. Recent government figures show 70 per cent of England's 2.21 million private tenants have paid deposits averaging £510, for a total of £800m; one in five experience difficulty in getting their money back.

"Consultations show the problem is a very common one," says Gavin McGuire, spokesman for the Department for Communities and Local Government (DCLG). "The classic case is when landlords keep back funds for the property to be 'professionally cleaned', which is totally unreasonable."

While there has been a form of tenancy deposit scheme in existence for more than two years, this has always been voluntary. But from next April it will be automatic and mandatory, with landlords either handing the deposits over to an independent and government-approved private company, or retaining the money themselves but becoming a member of an insurance-based scheme, to which they must pay a premium.

Deposits will also have to be returned within 10 days unless a dispute arises, in which case a new government service - the "Alternative Dispute Resolution"- will be available with an independent adjudicator.

Landlords who fail to comply could be charged up to three times the value of the deposit, barred from their property, and could also lose the right to evict tenants until any dispute has been resolved.

The reason for the delay in introducing the new rules, according to Mr McGuire, is that more time is needed to address any unfair consequences for landlords. "We are looking into what will happen in the case of a tenant abandoning a property or failing to pay the last month's rent - which, of course, we also recognise is illegal."

But critics see the delays as a bonus. "The Government has not made enough noise about this law," says Jonathan Moore from buy-to-let broker Mortgages for Business. "There has also been a lack of information regarding the third-party organisations."

Citizens Advice, which has long lobbied for a formal tenant-protection scheme, has expressed disappointment over the delay. It says the priority now must be to use the extra time to ensure all tenants and landlords are aware of the changes.

Ollie Morrison, 29, had difficulties getting his deposit back when he moved out of a rented house-share last December.

"We cleaned the place thoroughly," he says. "The landlord was pleased and said we would receive our deposits in full."

But his £400 deposit was being held by his letting agent - who wouldn't return it for over two weeks. "The whole process was unnecessarily bureaucratic and we needed the money to put down on our next property."

This experience has left Ollie in two minds about the TDS. "A lot depends on the third party. If the cash is going to be held by an agent, I don't think I would trust the returns process."