Government considers ending insured deposits
The Government is considering removing insured tenancy deposit schemes as part of a wider review of the tenancy deposit protection system, and is examining how they are protected and returned.
If the proposal were adopted, it would leave custodial schemes as the only form of deposit protection, requiring them to be held by independent providers rather than landlords or agents.
In response to written Parliamentary questions, Housing Minister Matthew Pennycook (pictured) said the aim is to ensure “that tenant deposits are as safe as possible”.
Power imbalance
“Under the custodial system, money is held by the Tenancy Deposit Protection provider as a neutral third party. Under the insured scheme, there is an inherent power imbalance against tenants, given the landlords and letting agents hold the deposit.
“There is growing evidence that the insured model also carries a higher fraud risk, with incidents of exploiting insured registration being reported.
When agents fail to maintain insurance or Client Money Protection cover, reimbursement for losses can also be delayed, leaving tenants exposed.”
“When agents fail to maintain insurance or Client Money Protection cover, reimbursement for losses can also be delayed, leaving tenants exposed.”
The minister added that tenant representative groups report low awareness of the differences between insured and custodial schemes, and that some tenants who dispute a landlord’s deduction can feel pressured to accept it rather than use Alternative Dispute Resolution services to challenge deductions.
No timetable has yet been provided for any changes, with the Government saying it is keeping the system under review.
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Author: Gemma
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