Monday, 9 April 2018

Generation rent: 

How the renters' deposit system could be made fairer for tenants and landlords

Having to raise weeks of rent in advance cripples young Londoners. Could insurance be the answer?
There aren’t many times I agree with the shouty Generation Rent tenants’ campaign group but I have some sympathy with its latest suggestion, that renters should be able to transfer some of their deposit from one property to another 

Landlords and letting agents have two options for protecting a deposit for the duration of a tenancy: they must either hand over the money to a custodial scheme, which refunds the deposit once the tenant has vacated the property, or they must buy insurance from a government-backed scheme to protect deposits they hold on to themselves. It’s free to use one of the custodial schemes but 60 per cent of letting agents and landlords prefer to keep their tenants’ deposits in their own accounts using the insurance-backed schemes, which charge £15-£26 per deposit.

Generation Rent says the most popular insurance-backed schemes should be scrapped, forcing us all to protect deposits using the custodial schemes, which it would like to see become “Personal Tenant Accounts”. I have some sympathy for this idea because I realise how difficult it must be for tenants, especially young renters and the low-waged, to raise enough cash for one deposit, let alone two.Tenants would be allowed to transfer “some” of their deposit to their new home once they’d paid their last month’s rent on their current property.
Also, I’ve heard plenty of stories of landlords and letting agents dragging their feet when it comes to returning deposits, with some not refunding the full amount until several weeks after the tenant has vacated.

However, I do have some concerns. Generation Rent hasn’t specified what percentage of the deposit would be transferred and, crucially, how much would be held back to cover any damage, excessive wear and tear, extra cleaning costs and things like rubbish disposal at a tenancy’s end. I have found that even the nicest, most diligent of tenants often fail to clean adequately when they leave, and nine times out of 10 they leave a pile of junk that I have to cart to the dump. Also, there’s very often a fair bit of minor damage, such as broken drawers, mould in bathrooms or stains on carpets.

I think a much better idea is the launch of affordable insurance premiums to replace tenants’ deposits altogether.I often don’t charge for this, but I think landlords will be understandably alarmed if there is any suggestion that not enough of the deposit will be left to cover such costs. There are a number of “zero deposit” insurance products on the market already, but the premiums are way too high for them to be realistic for most tenants. For instance, Dlighted’s premiums start at £129 per rental agreement, which is a lot for tenants on a tight budget, although it is one of the more affordable and most comprehensive policies for those renting more expensive properties. Insurer Munich Re has just launched a similar Zero Deposit Scheme, for which it charges one week’s rent to cover six week’s rental income. Again, I think this is too punchy for most tenants.

Property tech start-up flatfair offers a deposit-replacement tenants’ membership scheme, for which it also charges the equivalent of a week’s rent per tenancy agreement to provide 12 weeks’ cover. If only these deposit replacement schemes were cheaper, I think they could provide a real solution to the problem.

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