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Deposit passporting: Government investigating RLA plan

Sally Walmsley
Written by Sally Walmsley

Plans to allow tenants to transfer a deposit between landlords when moving house are being investigated by the government.

Creating a new system to allow deposits to be transferred seamlessly between tenancies was an idea mooted by the RLA in its 2017 election manifesto.

Many tenants have to raise a deposit ‘twice’, when moving. One deposit is tied up in the property they are leaving, while the second is needed to secure the property they wish to move into.

Tenants who can’t afford this ‘second deposit’ up front are then forced to either borrow the money or lose out on the property.

And there can be an impact on landlords as well, with tenants sometimes failing to pay the last month’s rent to use as a deposit in the new home.

The RLA believes it would be easier for all involved if a tenant’s deposit could follow them from property to property, with the tenant making up any shortfall caused by deductions.

Call for evidence

The government has responded to the call and is now asking for evidence from across the industry on the issues faced and how such a scheme could work.

It is asking for information on the barriers tenants face when it comes to providing a ‘second deposit’ when moving from one tenancy to the next and what can be done to speed up the return of deposits to tenants.

It is also looking at affordability issues and innovative ideas to make it easier for tenants to move.

Announcing the call for evidence Housing Secretary James Brokenshire MP said: “It can take too long for some tenants today to get their deposits back when moving, and where tenants need a deposit for their new rented home, some will struggle to afford it.

“…I want to look more widely at whether innovative approaches to helping tenants move more easily, including allowing tenants to passport their deposit between tenancies.”

RLA proposals

Under the proposals put forward by the RLA back in 2017 existing deposit schemes could offer a new deposit model to provide this service.

At the end of each tenancy the tenant would provide the new landlord with a certificate from the deposit scheme, and it that was acceptable to the new landlord it would continue to be held.

At the end of the first tenancy deductions would be dealt with as they are now, with the scheme adjudicating any disputes and the tenant would be asked to make up the difference.

Potentially the scheme could also allow tenants to save more into their deposit account allowing them to save a deposit for a larger or more expensive property or even save money towards a deposit on a home to purchase.

RLA policy director David Smith, who sat on the working group said: “Deposit passporting could be an effective way of tackling the affordability issues faced by many tenants, particularly those in the capital, where the average deposit is now £1,750.”

To read the full call for evidence document click here. 

Responses to it are due by September 5. 

About the author

Sally Walmsley

Sally Walmsley

Sally Walmsley is the Communications Manager for the RLA and award-winning Editor of RPI magazine. With 16 years’ experience writing for regional and national newspapers and magazines she is responsible for producing articles for our Campaigns and News Centre, the weekly E-News newsletter and editorial content for our media partners.

She issues press releases promoting the work of the RLA and its policies and campaigns to the regional and national media and works alongside the marketing team on the association’s social media channels to build support for the RLA and its work.

3 Comments

  • I am not convinced by this idea in it’s current form. I can’t see that the new landlord will be satisfied with having to make or trust the tenant to make an insurance claim to get any required deposit deductions. The insurance company may not pay out in full, or a tenant that frequently claims from the insurance may not be able to get an affordable policy.

  • There’s an issue I see with this idea – that of “bad tenants”.
    I’d want to see more detail on what happens if a tenant leaves the place in a terrible state but has passported their deposit to another landlord. After the previous landlord has got costs etc, and it’s been adjudicated, and the tenant turns round and basically says “what are you going to do, evict me ?” – does the deposit scheme pay the previous landlord and chase the tenant, or is the landlord left with recovering costs from a tenant that doesn’t want to pay ? Put another way, unless the previous landlord has some guarantee (eg the deposit scheme will guarantee payment and chase the tenant) – then why on earth would he agree to the tenant taking his deposit with him when he leaves ? Isn’t the idea of the deposit to cover (in part or full depending on scale etc) costs of fixing things after the tenant has left ?

    • We propose that the existing tenancy deposit schemes, which are well recognised and broadly trusted by landlords and tenants should be asked to offer a new type of product.
      This would be similar to the existing custodial deposit schemes so the deposit would be held by the scheme itself. This money held by the schemes would not receive interest and this would enable the schemes to partially fund themselves to keep costs low.
      At the end of each tenancy the tenant, if they were moving to a new tenancy, would provide the new landlord with a certificate from the scheme of the deposit they were holding.
      If that was acceptable to the new landlord it would continue to be held, otherwise the tenant would deposit more money with the scheme.
      The tenant would also buy a low cost insurance policy to cover any deductions from their deposit.
      At the end of the first tenancy deductions would be dealt with as they are now, with the scheme adjudicating any disputes and the tenant would be asked to make up the difference.
      If they failed to do so the insurance policy the tenant had bought would be used to make up the sum so that the new landlord would not be left without the security of the deposit they had expected.
      The scheme could then pursue the tenant for the money and could recover it by staged payments by agreement.

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