Following the Tenant Fees Act which came into force on 1st June 2019, and banned most fees being charged to tenants, the government has opened a consultation into another interesting potential shakeup of the sector.
A consultation from the Ministry of Housing, Communities and Local Government has called for evidence to try and “understand the barriers tenants face providing a second deposit when moving from one tenancy to the next.” The consultation aims to look at what can be done to speed up return of deposits when a tenancy is ended, as well as whether existing initiatives address tenants’ needs in this regard.
Perhaps the most interesting part of the consultation is the idea of ‘deposit passports’. Essentially, the idea behind such a passport is that you do not have to pay separate deposits every time you move; instead, you have a single deposit that follows you around wherever you go – unless of course anything gets deducted for damage to property when you leave a home, for example. This could radically cut down the time it takes to move as, in most cases, no transactions will have to be made and the deposit marked on your ‘passport’ will simply transfer over to your new home.
James Brokenshire, the housing minister, said of the proposals: “I am committed to making the process for tenants getting their deposit back much smoother. I want to understand whether there should be a deadline for landlords returning deposits. I also want to look at whether existing initiatives are meeting tenants’ needs and whether the market can offer improved products. Alongside this, I want to look more widely at whether innovative approaches to helping tenants move more easily, including allowing tenants to passport their deposit between tenancies.
“It is important that good landlords have the confidence to let out their properties safe in the knowledge that a deposit will provide them with reasonable protection from damages to their property. Any improvements to the way deposits are returned at the end of a tenancy will need to ensure that deposits still serve this purpose and that deposit protection continues to work well for both tenants and landlords.”
The passport idea is also interesting because it feeds into a potential future move to extend this ‘deposit passport’ into rental payments as well. Renters have become increasingly frustrated over the years that they cannot use regular rental payments as evidence when applying for loans or mortgages. While there are some agencies – such as Experian – now allows rental payments as evidence of credit, others do not, making it extremely hard for many potential first-time buyers to get on the ladder at all.
It would make sense to extend a ‘deposit passport’ at some point and allow tenants to build up a comprehensive rental history all in one place. Letting agents and lenders would be able to tell at a glance who has a good payments record, and tenants would be able to move quickly or buy a new home in the knowledge that years of paying rent worked in their favour rather than being discarded every time they moved.
It will be interesting to see the results of the consultation going forward, and hopefully it will end up benefiting tenants and continuing the transformation of the Private Rented Sector.
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