English Renter Reform Bill to Introduce “Lifetime Deposits”
A quick look across the border at some of the legislation introduced in the Queen’s Speech tells us that English renters will soon be able to use “lifetime deposits” to easier navigate the Private Rental Sector.
The idea of “Lifetime deposits”, sometimes known as “deposit passporting”, has been knocking around for some time. At the moment, when tenants want to rent privately, they must raise enough money to cover a security deposit (a bond). This is usually in the realm of four- or five-week’s rent, so if you’re looking at a property which costs £150 per week, you’ll need to raise between £600 and £750. This money is then paid to a registered deposit scheme (there are three UK government-backed ones currently) and kept until the tenancy ends. At that point, the landlord or agent will check the condition of the property, and will release the deposit back to the tenant, minus any deductions for damage. This is supposed to be done within 14 days of the end of the contract, however, this can take considerably longer. When a tenant wants to move from one private rental to another, this means that they either have to wait for their original deposit to be returned, or they have to raise an entirely new sum of cash to pay the second deposit. For those on a low income, or without a large amount of savings, this can be unaffordable.
Where a “lifetime deposit” will likely differ to traditional ones is that at the end of the tenancy, the tenant will be able to move a portion of the deposit straight into a new one, without having to wait to move out of the property and wait for all the post-tenancy checks to be done. This means that there will be a significantly lower financial burden on the tenant when moving from one rental property to another. After the old tenancy finishes, the tenant will receive the rest of their deposit back (minus the cost of any damage done to the property) as usual. However, the initial transfer of funds from old deposit to new allowed by the “lifetime deposit” scheme should mean tenants mustn’t worry so much about finances, nor go through so much stress in order to move.
Without further details, this seems like a good deal for tenants. It avoids one of the main pitfalls of “zero-deposit” renting. Under “zero-deposit” schemes, tenants take out an insurance policy to cover any damage they might cause. The policies cost considerably less than a standard deposit, but there’s no chance of getting that money back, and tenants will still be liable to pay for any damage. This means that tenants lose money over time, whether they keep the property in good condition or not.
Some landlords have shown concern at the proposal, due to it currently being unclear how a they would access the portion of the deposit which is transferred to the new tenancy. Rules around the timing of post-tenancy checks and returning of deposits to tenants may have to be enforced more strictly, in order to draw a line under one tenancy and start the next. When post-tenancy checks for the previous tenancy have been completed, the old landlord would lose claim to the funds. We expect that the process will become clearer as the legislation advances.
At TPAS Cymru, we’re interested see whether further reform of the way security deposits are set and collected will be part of Welsh Government’s ongoing Private Rental Sector work. We believe that in order for Private Rental accommodation to truly work for tenants, we must make it easier to move between properties, and easier to access in the first place.