A campaigning lettings agent says proposals to allow renters to transfer tenancy deposits between properties are to be welcomed – but will do little to improve the reality of renting.
Ajay Jagota of KIS properties and zero-deposit company Dlighted believes that so-called deposit passporting is “not a bad idea, just not a very good one”.
Some trade bodies and individuals, plus London mayor Sadiq Khan, have called for the passporting system to be introduced, allowing tenants to transfer tenancy deposits from one rented property to another. Tenants could top up or claim some of the deposit back, depending on the cost of the tenancy deposit on a new home.
But Jagota is unconvinced.
“It only works when deposits aren’t contested. If landlords and previous tenants end up in a lengthy deposit dispute, how can that money simultaneously be passed on to a new landlord? So the system doesn’t work when it’s needed most” he claims.
“After 10 years even the tenancy deposit establishment are finally admitting that the DPS system simply doesn’t work, but are still only proposing to fiddle around the edges of a system in need of comprehensive reform – and even the miniscule improvements they are proposing don’t seem to have been fully thought through.”
Jagota says transferable tenant deposits would in all likelihood make life easier for some people, but ultimately they would do little to tackle the fundamental problems inherent in the tenancy deposit system.
“From a tenant’s perspective it might make it easier to move from property to property, but it does absolutely nothing to make renting more affordable in the first place – and it still deprives average renters of more than £1,000, which many simply cannot afford, leaving some little choice but to settle for inadequate properties from inadequate landlords” he believes.
He says zero deposit systems not only save tenants having to find deposits, but makes it easier for them to move from one rented property to another by showcasing their track record and reliability as a renter.
“From a landlord’s perspective a traditional tenancy deposit simply doesn’t offer adequate protection against rent arrears or property damage, and hardly gives any help with any of the inevitable costs of renting out a property, from specialist cleaning to legal fees” he concludes.
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The current system may be flawed but its flaws are also merits. I have rented 6 homes in the past but am now also a landlord and a lettings agent. A good tenant will move heaven & earth to present the home well on exit, I always got 100% of my deposit back, no exceptions. A good tenant will have either planned ahead (to bridge the time waiting for deposit return) or will be able to borrow the money. If a tenant is unable to borrow from family, friends or a bank then what does it say about their reputation and suitability as a tenant of a decent property?
Spot on Michael- this is the old crux of the issue is that- does a Landlord want a Tenant that has no spare cash at all and would like to release the cash deposit to spend it. Whilst I applaud Ajay's endeavours, his primary premise is that Tenants have no other cash and wish to spend what cash they have- not appealing to Landlords. Equally, if they cant demonstrate a support network able to help in financial difficulty, this raises further concerns should a tenant hit harder times.
The instigation of a deposit passport is, in principle, a great idea and would relieve a lot of friction for many tenants however there are immense complexities (mainly the 2 issues of different landlords and what happens if deductions are required and the tenant can't 'top up') but, again, this goes back to the issue of- does a landlord want a Tenant who cant facilitate a double deposit for a few days/weeks whilst their old deposit is reconciled?
To say 'the tenancy deposit establishment are finally admitting that the DPS system simply doesn’t work' is absolute nonsense- the schemes work excellently but are always exploring ways to improve the way users/consumers interact and what can be done to bring further transparency & streamlining whilst still protecting each parties position.
A couple of notes:
1. It has taken the various deposit schemes the best part of 10 years to come up with "passporting"!
2. Next time you hire a car, ask yourself why the car hire company don't ask you for a cash deposit to mitigate the risk of damage and instead utilise an insurance policy?
Hi Ajay- in response to your car comparison:
1. You cant hire a car, stop paying the hire charges and stay in that car, using it as you see fit, for months whilst the owner seeks repossession.
2. The average car on hire is worth around £20k whilst the average property is worth £225,000- in London the average property value is over £600,000.
3. If a car is worth @ £15k then up to @ £5k of damage can be accrued before it is considered a right off and your insurer supplies a replacement-n I have personally witnessed tenants cause internal damages of over £60,000
4. When hiring most cars, you have to opt for an array of expensive premium products to reduce any excess liability as well as the comprehensive nature of the cover offered
5. More than 1 person can't drive a car at a time- lots of people can occupy/inhabit even a studio flat
6. Drivers are legally required to have insurance to cover claims, loss & PL- tenants are not required to have any such insurance
Do you really want me to go on.....?
1. yes you can - you pay for the initial rental - what happens if you don't take it back?
2. comparing the worth of property and cars is irrelevant they are both assets one is movable representing greater risk yet they still use insurance?
3. Causing 60K of damage is no good if you've only taken 1 months cash deposit, yet with an insurance policy that covers you for 6 weels damage, rent and legal is a lot more effective at recouping the costs.
4. that is the consumers choice and a choice we all make when hiring a car?
5. "lots' of people should not be inhabiting a property only those on the AST? up to 4 people excl driver can inhabit a car as passengers!
6. it is the car hire company who ensure the insurance and the driver complies?
Once upon a long time ago, car hire companies used to take cash deposits to indemnify the risk but not now they don't.
All the above shows why the direction of the market is heading towards insurance - but ultimately its the market that decides!
1. If car is stolen insurance replaces car- not that easy securing a property from tenants in default
2. Tell a Landlord that the fact it is their largest asset and may well be the underpinning of their retirement or family future security and see if they agree that value of the asset is irrelevant
3. Agreed- however how many tenants would cause more damage than they currently do if their cash wasn't at risk- I think landlords & agents agree this would be higher
4. It is a consumers choice but given asset value a landlord should be entitled to put securities in place they are comfortable with
5. Whilst 5 people can get in a car- it can only be driven to 1 location fulfilling its main purpose. A property can be inhabited by numerous people fulfilling its purpose.
6. Yes but the point is drivers HAVE to have insurance on their liability/culpability- tenants don't.
FYI the car hire places does take a deposit you just do not see it.
If you only have a debit card they will block the deposit amount from your account. Due to the way a credit card is setup the car rental place can claim the money later if needed.
Personally I see no issue with the current system and do not see a problem with a passporting system as it might make it easier for landlord and tenant, however how will it work if the old landlord need to claim Some or the whole amount, but I’m sure it can be resolved.
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