Passporting Deposits Could Soon be an Option for Landlords

Most landlords ask tenants to pay a deposit when they start a tenancy. New rules in England means this is typically 5 week’s rent, but where the annual rent exceeds £50,000, a 6 week deposit can be taken.

The deposit is there to cover any accidental damage or other issues, so the landlord can deduct money from the deposit in the event of property damage at the end of the tenancy.

The Importance of Deposit Protection Schemes

As of 2007, a tenant’s deposit must be placed in a government-approved deposit protection scheme. Once the deposit has been placed in a scheme, landlords must notify the tenant which scheme they have used. This must be done within 30 days of the tenant paying a deposit. When the tenancy ends, the deposit must be returned within 10 days of both parties agreeing how much is due.

Failure to do any of these things means a tenant has the right to request their deposit back. The court can also rule a landlord must pay up to 3x the value of the deposit. Failure to protect a deposit in a prescribed scheme means a landlord can’t serve a Section 21 notice.

Helping Tenants to Budget Better

Deposits protect landlords, but if a tenant wants to move to a new property, they will often need to find another deposit before signing a tenancy agreement. Since it can take up to 10 days for their original deposit to be returned, a tenant may end up having to make a new deposit before the old one is refunded, this makes it more difficult for tenants to move to new rental homes.

Moving From one Rental Property to Another

Minsters are currently considering the merits of deposit “passporting”. This would enable deposits to be transferred between landlords on the day the tenant moves out of one property and into the next. Tenants could then move seamlessly between two rental properties without having to pay a second deposit before their first deposit had been returned. In more expensive areas, a deposit can be a considerable sum, which is a huge burden for cash-strapped tenants.

James Brokenshire, Secretary for Housing, put forward the proposal at the Chartered Institute of Housing conference in June. Ministers will now look at evidence to help them decide whether the passport scheme should be government-backed or supported by existing deposit protection schemes.

Speaking in the Times, Mr Brokenshire said:

“Sometimes the barrier to people moving, indeed that sense of mobility of labour across the economy, can be the fact that someone’s got one private rental and they want to move, and the time period between the release of the first deposit, and then the deposit that’s needed on the second property. We need to do this thoughtfully, which is why I’m not rushing into this.”

Tenant Groups Welcome Deposit Passporting

Tenant groups have welcomed the proposals, saying the move would provide some welcome respite to tenants. Many campaigners have long lobbied for increased measures to help make private rental housing more affordable.

Landlord Groups Less Happy About the Proposals

However, landlord groups are unhappy about the proposed deposit passporting scheme. They say such a move would reduce the protection a deposit gives to a landlord, as they won’t have time to prevent a deposit being moved over in the event of issues at the end of a tenancy.

Whether the scheme gets the go-ahead remains to be seen.