Government to introduce mandatory tenant deposit ‘passporting’

Secretary of State for Housing James Brokenshire is considering a national rental deposit passporting scheme that would enable tenants to transfer their rental deposit between letting agents or landlords as they moved from one address to another.

The proposals, which were revealed at the Chartered Institute of Housing’s annual conference in Manchester, are part of the government’s ongoing attempts to make the private rental sector fairer and more transparent.

Ministers believe deposit passporting would solve the long-standing problem of tenants who have to find substantial sums to pay the deposit on their next home while waiting for their old one back.

Deposit passporting

But Savills has questioned the plans, saying that if a deposit is passed to the next landlord before any money owed for dilapidations have been agreed, it “offers no protection to the existing landlord, which obviously negates its purpose”.

Tenants in dispute with their old landlord would have any contested sums held back from their deposit, and they would then have to top up the difference to ‘passport’.

Brokenshire (left) told the conference that his officials were looking at whether a passporting system would be government-run or operated by the existing deposit protection organisations.

“Sometimes the barrier to people moving 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,” Brokenshire told The Times.

“We need to do this thoughtfully, which is why I’m not rushing into this.”

Jon Notley, of alternative deposit service Zero Deposit, says: “Landlords understandably want to have the certainty of full deposit protection from day one, and have no visibility of whether their incoming tenants will have deductions from their previous deposit.

“Deposit replacement products like Zero Deposit are already helping tenants escape the deposit trap, and with all of the consumer protections built around FCA regulation. If the industry shuns the shoddy, unregulated products that risk blighting our new industry, the solution to this problem already exists.”

Jude Greer, Reposit’s CEO and Co-Founder (left) says: “An acknowledgement of the cash-flow issues facing tenants is a positive step but unfortunately tweaking the current system doesn’t solve the systemic problems.

“A landlord needs security on their property and as such, they will not want to release that security until they are sure the risk is eliminated. I don’t see how the money can be transferred in a timely enough fashion without impacting the landlord.

“A tenant needs to wait 10 days post-tenancy to request their deposit back. If there are deductions, this process will be much longer. If there is a dispute, it can take up to 28 days to resolve with the deposit schemes, there are many cases of it taking longer than that too. Cash deposits need to be replaced entirely with a more radical solution like Reposit to truly solve the problem.”

ARLA response

David Cox (left), Chief Executive, says: “We’re supportive of this concept in principle, but it needs a practical, workable solution. We’ve been sitting on MHCLG’s Tenancy Deposit Protection Working Group for the last 12 months, looking at the problem and finding answers.

“Significant progress has been made, and we think we’re close to a practical, implementable solution; but we’re not quite there yet.

“For deposit passporting to work we need to ensure that both the outgoing landlord’s deposit can be used if needed, while the incoming landlord has certainty they will get the full deposit they have agreed by the tenant. Affordability for tenants of any bridging loan or insurance policy will be key if deposit passporting is going to be a workable and affordable solution for the future of deposits.”