What happens if there is a dispute and the tenant refuses to pay?

What happens if there is a dispute and the tenant refuses to pay?

Although deposit replacement schemes are becoming increasingly popular amongst landlords, agents and tenants, some people remain cautious about using them because they don’t feel they are as secure as traditional cash deposits.

They think that because there is no deposit, the tenant can refuse to pay for breaches of the tenancy agreement, such as damage, leaving the landlord to foot the bill. The truth is that landlords who use Ome’s Deposit Replacement Membership are covered against this and will actually get money to cover damages quicker than they would with traditional cash deposits. Here’s how…

 

What happens if the tenant refuses to pay?

With Ome’s Deposit Replacement Membership, this is never an issue for landlords, because we pay the landlord after an adjudication.

If the tenant refuses to pay, it’s our problem. This means landlords don’t have to worry and often get money to cover breaches to the tenancy agreement quicker than they would with traditional cash deposits.

 

How deposit replacement schemes work

What happens if there is a dispute and the tenant refuses to pay?

The misconception that deposit replacement schemes are less secure than traditional cash deposits stems largely from confusion about how the different financial models work. We’ve previously explained how deposit replacement schemes work, but in summary, the upfront deposit is replaced with either a one-off payment of around one week’s rent, or on-going smaller monthly payments.

Because the amount that the tenant pays is less than a traditional cash deposit and there is no ‘money in the bank’ to take money out of, some landlords and agents understandably assume that there is no financial security if the tenant refuses to pay for breaches to the tenancy agreement such as damages, cleaning or rent arrears.

However, with deposit replacement schemes the tenant is in fact still responsible for paying for any damage left at the end of the tenancy – just like they would be with a traditional cash deposit. How the different deposit replacement schemes make sure the landlord gets this money differs, but here’s how it works with Ome’s Deposit Replacement Membership.

 

Ome’s resolution process

To understand how we protect landlords from tenants who refuse to pay for breaches to the tenancy agreement, it’s important to explain how the resolution process works. Our in depth guide goes into detail of how the resolution process works,  but here is a simplified version:

What happens if there is a dispute and the tenant refuses to pay?

Step one: the agent or landlord should try to agree a settlement for any breaches to the tenancy agreement, such as damage, cleaning or rent arrears

 

What happens if there is a dispute and the tenant refuses to pay?

Step two: if a settlement cannot be agreed the agent, landlord or tenant can escalate the case to our resolution team

 

What happens if there is a dispute and the tenant refuses to pay?Step three: we will try to settle any disagreement using what we call ‘early resolution’

 

What happens if there is a dispute and the tenant refuses to pay?Step four: if a settlement cannot be reached through early resolution, we will conduct a formal adjudication. This is no different to what happens with traditional cash deposit. Both sides present evidence and a decision is made by an independent adjudicator.

After the adjudication we pay the landlord the money and collect the money from the tenant. If the tenant refuses to pay, the debt is our problem. We then have the responsibility of reclaiming the money from the tenant, by legal means if necessary.

 

Want to find out more about Ome’s Deposit Replacement Membership?

Are you ready to offer your landlords and tenants a deposit replacement option or do you want to find out more? Get in touch via hello@omehq.com or via the live chat.