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Proposed scheme could see tenants transfer deposits between properties

Estimated reading time: 2 mins

Alice Sanderson, June 27, 2019

Ministers are considering a scheme that could allow tenants to transfer rental deposits directly between landlords.

 

Passporting

Known as deposit “passporting” the scheme would prevent tenants from having to wait for a refund on a deposit from a previous property while also having to pay up for their next property.

Ministers hope that the scheme would tackle the problem facing millions of renters whose cash is tied up with their existing landlord and typically need the equivalent of 1-2 months rent to fund another deposit.

According to the Deposit Protection Service (DPS), the average rental deposit is around £1,040 in England and Wales, and about £1,750 in London.

The proposals come at a time where the private rented sector is increasing. In the UK, there are around 4.5 million privately rented households, up from 2.8 million in 2007.

Passporting would allow a direct transfer of funds on the day of the move to the new landlord from the previous one.

If needed, the previous landlord would still be able to claim parts of the deposit for any damages, and if this were to happen then the tenant can top up the deposit.

 

Housing secretary

The proposal was put forward by the housing secretary, James Brokenshire, at the Chartered Institute of Housing conference in Manchester.

He is calling for evidence on whether the market can support the idea through existing deposit schemes, or whether it should be government-backed.

Mr Brokenshire said forking out for a further deposit could “sometimes [be] the barrier to people moving”, but he acknowledge the policy would need to be done “thoughtfully, which is why I’m not rushing into this”.

 

Response

The proposal was welcomed by housing campaigners, who have been campaigning for more support for private renters as their numbers grow.

Polly Neate, chief executive of housing charity Shelter, said: “A deposit passporting scheme would help the country’s hard-pressed renters avoid having to stump up a fresh deposit before they’ve got the old one back. With the number of people in private renting growing, it’s great to see the government recognising that tenants need greater security.”

However, others have criticised the idea, with Jane Cronwright-Brown, head of lettings at Savills estate agents, saying that it negates the purpose of having a deposit scheme in place because “if a deposit is passed on to a new landlord before concluding the outgoing tenancy for dilapidations, it offers no protection to the existing landlord”.

It is also likely to be a further to blow to buy-to-let investors, who are still digesting the government’s plan to abolish section 21 of the Housing Act, which allows landlords to evict tenants within eight weeks of the end of a fixed-term tenancy without specifying a reason – often referred to as “no-fault evictions”.

 

Further information

If you have a query regarding landlord and tenant disputes, First4Lawyers are here to help. Contact our specialists today for more information.