Will transferring tenancy deposits simply shift the problem elsewhere?

According to property campaigner, Ajay Jagota, proposals to allow renters to transfer tenancy deposits between properties are to be welcomed – but will ultimately do little to improve the reality of renting.

Related topics:  Landlords
Warren Lewis
13th October 2017

Mr Jagota also posed the question: “If landlords and previous tenants end up in a lengthy deposit dispute, how can that money simultaneously be passed on to a new landlord?”

The Residential Landlords Association is one of several organisations to recently call for tenants to be able to transfer tenancy deposits from one rented property to another.

The membership body’s proposals would see tenants able to top up or claim some of the deposit back, depending on the cost of the tenancy deposit on a new home.

London Mayor Sadiq Khan’s recently published Housing Strategy also states that the Mayor’s Office intends to work on the “passporting” of tenancies to allow deposits to be transferred when a tenant moves home rather than having to pay a new one before an existing amount is returned.

The National Landlords Association – a partner of deposit protection scheme mydeposits - has also put forward the idea that the forthcoming draft Tenants’ Fees Bill should include provision for the passporting of undisputed deposits between tenancies.

Ajay Jagota is founder of deposit replacement insurance solution Dlighted. The deposit free renting system gives landlords a rent guarantee, £600,000 of protection from property damage and free legal assistance.

Ajay said: “This is not a bad idea, it’s just not a very good one. For starters, 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.

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 though through.

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 £1000, which many simply cannot afford, leaving some little choice but to settle for inadequate properties from inadequate landlords.

Zero deposit systems like Dlighted don’t just save them that expense altogether, our unique Trusted Tenant scheme also makes it easier for them to move from rented property to rented property 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.

Our system also saves landlords and letting agents the time and money of collecting and administrating deposits, and removes the need for any kind of deposit dispute process.

And from the government’s perspective it does nothing to get the billions currently sitting in deposit accounts into the wider economy or prevent the pervasive theft from deposit accounts by crooked landlords and letting agents.

There’s nothing wrong with passporting per se, it’s just when it comes to issues like affordability in housing and conditions in the private rented sector it just passports problems elsewhere. If we all agree that deposits don’t work, let’s ditch them altogether.”

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