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TDS under fire for shock rate hike

The Tenancy Deposit Scheme has come under fire from some of the largest lettings firms in the country for hiking membership rates to “monstrous” levels.

The TDS, which was one of three schemes to be introduced in 2006 to protect tenants’ deposits, has revealed that it is overhauling its fee structure and will introduce a minimum fee of £750 for 2010/11, 29% higher than its previous rate of £583.

A spokesman for the TDS says he expects one third of its 3,000 members to pay the minimum fee, with remaining members set to face a loaded fee based on a formula that takes into account the number of tenancies agents have registered at a particular date in the year to be determined by the TDS, the number of disputes they’ve referred throughout the year and the professional body of which they are a member, since this reflects whether or not they have client money protection in place.

The TDS is in the throes of notifying member agents of their new fee rate. It will issue one invoice now, which is due to be paid by March 31 2010, and one in the summer, which it says will take into account the change in registered tenancy agreements and disputes in the first half of the year.

The spokesman says: “It is fairer to charge by tenancy and not office in view of the disproportionate number of disputes being referred by some agents while others are not referring any at all.

“The formula means that some agents will be charged for anything above the norm, so they will be charged a variable fee.” On what constitutes the TDS’ definition of norm, he adds: “The norm is variable.”

But The Negotiator can reveal that a large number of lettings agents are struggling to see anything fair about their new rate, with one firm understood to have already terminated its membership with the scheme.

One industry source says: “I have spoken with a number of agents who have received incredibly and stupidly high invoices and are confused about what to do. The costs look very high.”

The new fee structure is focused predominantly on tenancy volme, which translates into agents paying between £9 and £12 per tenancy from this year based on rates seen by The Negotiator.

Nevertheless, another source believes that the new fee structure, which for them equates to a a hike of over 400% on last year’s fee, could threaten the future of the scheme. They say: “This is a mad figure. The new rates will break some agents and lead to tenants’ deposits not being registered.

“This is a total betrayal of the system. If half the registered agents with TDS go into the custodial scheme, I guess TDS will fold. What benefit is that?”

Ivor Dickinson, managing director of Douglas & Gordon, claims that his new TDS rate will cost him £36,337 per annum. The new rate means that each case the firm referred to the TDS last year cost the firm £1,297.

"The 500% increase in costs for the TDS are exorbitant, monstrous and hardly in keeping with the biggest global recession in living memory. Something must be done.

"I know the reason they have gone up is because a large majority of agents, particularly those new to lettings and with no experience of settling end of tenancy claims, are now just forwarding every claim they have to the TDS and funnily enough TDS can`t cope. Maybe the TDS should have thought about this when launching the scheme. Why everyone is so incompetent beggars belief."

Meanwhile, Kinleigh Folkard & Hayward's rate has rocketed by 1000% from £14,000 to £200,000.

A further concern is that the TDS will charge for tenancy agreements until agents deregister them, which means that those who forget to deregister expired agreements could be overpaying for their TDS membership. The TDS spokesman denies that the overhaul of the fee structure is a money-making scheme. “We are a not-for-profit organization and providing we do the right thing to cover our costs, we are not looking to make money.”

The Royal Institution of Chartered Surveyors is understood to have pledged a £500,000 guarantee to government if the TDS collapses. It was unavailable for comment at the time of writing.

Have you received your new TDS rate? If yes, let us know.

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