Government plans for deposit passporting

by Property 118

9:17 AM, 28th June 2019
About 4 weeks ago

Government plans for deposit passporting

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Government plans for deposit passporting

More than 4 million people live in the private rented sector, yet when moving home, some tenants can find it a struggle to provide a second deposit to their new landlord, risking falling into debt or becoming trapped in their current home. Ministers want to understand the scale of this problem.

Ministers are inviting proposals to make it easier for renters to transfer deposits directly between landlords when moving from one property to the next.

Freeing up deposits and allowing a renter’s hard-earned cash to follow them from property to property as they move to take that perfect job, to move nearer to family, or find a place that suits their changing needs will create a fairer housing market that works for all.

Director of policy and practice at the NLA, Chris Norris, said: “The idea of deposit passporting has been around for a while now, so it comes as no surprise that the Government is considering it. Mr Brokenshire acknowledges that if this is to be implemented it must be done thoughtfully, but we must make sure that adequate thought is given to the needs of both tenants and landlords.

“Everyone agrees that moving between tenancies should be made easier and cheaper, but we also need to recognise why landlords take deposits. A deposit protects against damage or default, so landlords must be confidence their costs are covered before releasing the tenants’ money.”



Comments

Paul Maguire

13:53 PM, 1st July 2019
About 3 weeks ago

Reply to the comment left by JJ at 01/07/2019 - 13:11
The Scottish rules seem to be slowly mimicked by England [eg: the scrapping of fees] but the one that I don't like is the "No minimum or maximum lease period", especially during the Edinburgh Festival months [starting now]. I've raised rents by 30% to compensate for the added risk with new tenants whilst the ones who have stayed for 2 or 3 years will go up about 10% towards the end of this year. I keep an eye on what other landlords charge and stay in line, which shows the effect of new legislation to protect tenants ending up costing them more....through no fault of their own. The Shelter Effect !!

Jan Martin

14:45 PM, 1st July 2019
About 3 weeks ago

Just read that this was suggested to the goverment by RLA in 2017

David Price

17:19 PM, 1st July 2019
About 3 weeks ago

Reply to the comment left by Paul Maguire at 01/07/2019 - 13:53
I like the phrase "The Shelter Effect".

Paul Maguire

10:19 AM, 2nd July 2019
About 3 weeks ago

Reply to the comment left by Ian Narbeth at 01/07/2019 - 10:54
Hi Ian. Not sure if I can paste links here but this piece adds weight to 2 months rent in advance and no deposit being acceptable without needing to be protected. England and Scotland. Personally I think it's a fairer way and benefits both the tenants and the landlord.
https://www.scottishhousingnews.com/article/blog-a-tenancy-deposit-or-rent-in-advance

Ian Narbeth

11:00 AM, 2nd July 2019
About 3 weeks ago

Reply to the comment left by Paul Maguire at 02/07/2019 - 10:19Thanks Paul, interesting case. I have read the full judgment at https://www.scotcourts.gov.uk/search-judgments/judgment?id=3751dfa6-8980-69d2-b500-ff0000d74aa7 The key point is: "The Court made the crucial distinction between a payment discharging an obligation or liability, and a payment made as security for that obligation or liability."
I was interested in how the court viewed the "last month's rent" if the tenancy were to become periodic. That did not happen and so the Sheriff's remarks are what lawyers call "obiter". However, I think there might be a problem that the learned Sheriff overlooked, which is this.
Suppose the tenancy was for 12 months initially but rolled on after that time. If the "last month's rent" does not discharge the obligation to pay rent at the start of month 12 but discharges the obligation to pay the last month's rent, whenever that this, neither landlord nor tenant will know at the outset, or indeed at any time before the tenancy ends precisely which month's rent has been discharged. Indeed it is hard to say that an obligation has been "discharged" at all. The landlord should account for it as income but in which accounting period? I can see that a different court might come to the conclusion that the payment had the hallmarks of a deposit.
If this scheme works as it did in the case cited, the landlord gets round the problem of the last month's rent not being paid but means of course that he has no security for damage to the property.
Coming back to the article at the start of this thread, it is unlikely the Government will encourage payment of first and last months' rent as it hits cash flow in the same way as providing a month's deposit.

Paul Maguire

12:31 PM, 2nd July 2019
About 3 weeks ago

I see your point Ian and I still have 2 tenants on ASTs with the rest on New Model Tenancy Agreements, all with 2 months rent in advance and no deposit [apart from a family in a country cottage who have both]. With regards to AST's, I've always believed that they roll over to Periodic [month by month] after the initial contracted period but according to Shelter [in Scotland anyway] they automatically renew to the original 6 or 12 month period. This came as a surprise to me.

JJ

12:41 PM, 2nd July 2019
About 3 weeks ago

Reply to the comment left by Paul Maguire at 02/07/2019 - 12:31
Is it true that they "automatically renew to the original 6 or 12 month period"? I don't know about Scotland but don't think this is true in England is it?

Luke P

12:48 PM, 2nd July 2019
About 3 weeks ago

Reply to the comment left by Ian Narbeth at 02/07/2019 - 11:00
What are your thoughts on this, Ian?

If, as is reported, the second payment wasn’t indeed a ‘deposit remainder’, how on earth did, on appeal, the Court find it to be anything other than a deposit?

https://www.landlordsguild.com/deposit-penalty-multiple-breaches-and-limitations/

Ian Narbeth

17:05 PM, 2nd July 2019
About 3 weeks ago

Reply to the comment left by Luke P at 02/07/2019 - 12:48
Luke
I can't add much to the commentary at https://nearlylegal.co.uk/2019/06/deposit-penalties-how-many-breaches-is-too-many/

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