Lifetime deposits:

As the New Year and new decade approaches, for good or ill, we can expect more changes in the Private Rented Sector (PRS).

With the election over, there’s far more certainty around and if the effect the election’s had on the stock market is anything to go by, we can expect a boosted housing and rental market in 2020.

There’s light at the end of the tunnel regarding Brexit, at least the government is now able to act decisively, but the jury’s still out as to how long the new government’s honeymoon period will last.

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Despite everything that’s happened in 2019 though, the property market has remained remarkably stable, with rent levels quite resilient.

Landlords have faced a slew of new regulations and are still grappling with an enormous amount of new information to keep on top of, if they are to comply with everything that’s been thrown at them recently, Changes range from the changes introduced by the Deregulation Act, the tenant fee ban, the Homes (Fitness for Human Habitation) Act, and more recently introduced in Boris Johnson’s Queen’s Speech, the Renters’ Reform Bill which includes banning S21 and lifetime deposits.

Lifetime Deposits and Passporting

The concept of a “Lifetime” or “Transferable Rental Deposit” was mentioned in a press briefing by Prime Minister Boris Johnson before the election: “The costs of deposits make it harder (for tenants) to move. We are going to fix that.”

Unlike some of the other proposals mooted by the Conservatives, these would be largely welcomed by landlords and agents. The RLA has said: “…it would be easier for all involved if a tenant’s deposit could follow them from property to property, with the tenant making up any shortfall caused by deductions.”

David Smith, RLA Policy Director says:

“We have long argued that deposits should be transferable. It will make renting cheaper and easier for tenants. It is vital though, that the detail of the plans ensure that both landlords and tenants can have complete confidence in how the lifetime deposit will work.

Mentioned in a radical Queen’s Speech this December, the Government is to introduce a Renters’ Rights Bill in the New Year which aims to “improve the experience of those living in the private rental sector and the affordability for tenants when moving from one tenancy to the next by introducing a new lifetime deposit.”

Other less popular measures contained in the Bill include the abolishion of ‘no-fault’ evictions by removing Section 21 from the 1988 Housing Act, along with reforming the grounds for possession.

This future Bill’s provisions will apply only to England as housing policy is now devolved to the regional nations of Scotland, Wales and Northern Ireland.

A Government’s Tenancy Deposit Reform Working Group, of which ARLA Propertymark was a member in September 2019, proposals were put forward as to how the concept of a tenants’ passporting system, with lifetime transferable deposits, could be made to work for the benefit of both tenants and landlords.

ARLA Propertymark has said in its consultation response that:

“If the introduction of a passporting system is to be viable the Government must ensure that both the outgoing landlord’s deposit can be used if needed, whilst the incoming landlord has certainty, they will get the full deposit they have agreed with the tenant.

“Would this lead to the change in landlord and tenant behaviour? Most likely, however, the Government must introduce a measure that reduces the risks landlords and agents face with three things that can help tackle or prevent negative behavioural changes in a passporting system. Firstly, a tenant guarantee. Secondly, a requirement to have an inventory. Thirdly, the requirement for a written tenancy agreement.”

We shall have to await the full publication of the Renters’ Reform Bill 2019-20 to find out the full details of the proposals, but these will doubtless be subject to industry scrutiny as they move forward.

Other developments in the rental deposits sphere, where some private companies are working on the concept of passporting, a digital record which allows tenants to build a digital rental profile over time, and gives assurances to landlords as to their payment records. One such system is tied-in to Experian’s credit checks, where the rental payment record affects the credit score attained.

Experian says that early analysis has proved that by adding rental data to credit reports, the proportion of tenants who can prove their identity online increases from 39% to 84%.

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