‘Broken’ deposits system ‘crying out for reform’ – Which?
A new report claims that the deposit system is broken, and suggests that deposit replacement products or tenants’ passports would help renters move home without delays.
Which? says that a third of tenants moving property in the past two years had to pay a new deposit before receiving their previous one back, with two in five forced to use a credit card, overdraft, or borrow money to finance the move.
Of those tenants who moved out of a rental property in the last two years, one in six who received their deposits back said it took four weeks to arrive and more than half (55 per cent) were not refunded in full.
The top two reasons for a deduction were cleaning (50 per cent) and damage to property (32 per cent).
The magazine, which is the brand name of the Consumer’s Association charity, said it had heard from “many” tenants who felt their deposit money had been unfairly retained, or whose deposit had not been protected, as is required by law.
It has called for the Government to review deposit adjudication schemes “to ensure they are working in the best interests of tenants”.
The magazine said: “It should review the current, cash-based deposit system, and consider possible alternatives to avoid tenants having to cover two deposits at once when moving between properties.
“These alternatives include new, insurance-style options or the direct transfer of deposits between properties.”
Which? managing director of home products and services Alex Neill said that the deposit system “is crying out for reform”.
The Tenants Fees Bill, which will ban agents from charging fees to tenants and will also cap both holding and security deposits, is due back in Parliament this month.
Eddie Hooker, CEO of mydeposits, said: “Since their introduction more than 12 years ago, tenancy deposit protection schemes have consistently delivered a good service for the majority of tenants.
“Whilst I recognise that the systems and processes of deposit protection may need updating to deal with today’s rental market, I do not believe that overhauling the current system in favour of, for example, no deposit insurance alternatives, offers any greater protection for tenants.
“Yes, there is an affordability issue for tenants, particularly those in London having to find on average £2,500, and this is an issue that must be addressed.
“However, purchasing an insurance policy which reimburses a landlord if the tenant cannot or will not pay any losses, simply buys the tenant out of having to pay a deposit and could place tenants is a worse situation some years down the line.
“Ultimately, tenants are still liable for recompense to an insurance company which many tenants simply do not realise.
“The fees/premiums charged over a ten-year renting period, could end up costing the tenant £6,000-£7,000 for nothing.
“What many don’t understand is that deposits are refundable if the tenant abides by the terms of the tenancy agreement. Insurance premiums are not.
“Any change to the current system should recognise and embrace the existing benefits, such as Alternative Dispute Resolution, but be enhanced.
“Options such as deposit loans, custodial-only schemes or deposit passporting could address affordability issues and offer tenants greater control, while continuing to give landlords the confidence to remain in the buy-to-let market.”