Activist leaders of the Generation Rent group are backing Labour’s move towards a future tenancy deposit protection system based entirely on custodial schemes.
Housing Minister Matthew Pennycook has admitted that he’s looking at ending the dual-model system which has operated for almost 20 years.
This allows landlords and letting agents to choose between custodial protection, where the deposit is held by the scheme provider, and insured protection, where the landlord or agent retains the funds subject to statutory safeguards.
Pennycook says the insured option is more vulnerable to fraud, and gives the advantage to landlords, and Generation Rent has taken up this idea in a petition.
The wording of the petition accuses landlords of abuse of the system.
It says: “Some landlords actively pressure renters to settle for less than they deserve, by exaggerating their claims, refusing to deal with the deposit scheme or simply not protecting the deposit in the first place.
“While renters can take legal action if our deposit is not protected and get compensation, this can be a slow process with large upfront costs.
“And even if a claim for imaginary damage is ultimately rejected by the deposit scheme, there is no cost to the landlord for trying to get away with this.”
In a complementary article in the campaign ing magazine Big Issue, Generation Rent deputy chief executive Dan Wilson Craw writes: “In 2019, [sic] the most recent year we have enough data to make a comparison, releases of custodial deposits were 32% more likely to be disputed than releases of insured deposits, indicating what effect this landlord leverage may have.
“Last year we recommended a range of measures that would encourage renters to challenge unfair deposit claims and reunite them with their money more quickly after moving out – including the abolition of insurance-backed schemes.
“The government has listened and is now carrying out a reprocurement process for deposit protection, proposing a single provider and only the custodial system of protection.”
Earlier in the article, he claims: “The structure of the protection system makes it easier for greedy landlords and letting agents to cling on to as much of their tenant’s money as they can.”
However, Eddie Hooker – chief executive of the MyDeposits service – claims that no impact assessment, consultation paper or research has been published by the government to demonstrating its that insured schemes present a materially greater fraud risk than custodial schemes.
Supporters of the status quo maintain that insured schemes have successfully protected billions of pounds of tenant deposits since their introduction in 2007 while providing access to independent dispute resolution and statutory consumer safeguards.
