Eddie Hooker Blog

Monday 19th December 2011

When tenancy deposit protection was first introduced by the Government in April 2007, two types of schemes were authorised. 

One was custodial, where the letting agent or landlord would be required to lodge the deposit money with the scheme for safekeeping. 

The other was insurance-based, allowing the agent or landlord to hold on to the money for a fee. Within the insurance-based framework, the Government approved two schemes – my|deposits and TDS.

Five years on and it is right to look at whether insurance schemes, and tenancy deposit protection in general, have been successful. 

To help in this analysis, I refer to the recently published Private Landlords Survey 2010 commissioned by CLG. 

The statistics are revealing. 

The headline figure is that of all landlords and agents in England and Wales that were surveyed, 86% consider deposit disputes no longer a problem, and understand the requirements of the legislation. 

I consider this to show that tenancy deposit protection, and importantly, the three schemes, have been successful in changing behaviour within the sector. 

The recent co-operation between the schemes on the educational deposits, disputes and damages guide was rightly recognised by the Government and the industry at large – further evidence that the schemes have made huge strides forward in recent years and are largely considered a success. 

Looking at the split of protected deposits between the schemes, again using the results of the survey, some 51% of all deposits taken on an AST agreement are protected by an insurance-based scheme, be that my|deposits or TDS. 

A further 35% are lodged with the custodial scheme and 14% are not protected for various reasons. 

Agents and landlords use an insurance scheme for different reasons, the main one being the ease and speed of the deposit release at the end of the tenancy, a problem which the custodial scheme, despite its best efforts, will always struggle to resolve.

Quick release of the deposit aids movement of tenants between properties and landlords, thus helping to build the private rented sector, and cuts out unnecessary bureaucracy and delays. 

Despite cries from certain corners of the industry that landlords and agents only use an insurance-based scheme because they want to spend the deposit or run off to a tropical island to spend their misappropriated riches, dispute levels across the market are running at less than 3% – evidence that the vast majority of tenants are happy that they get their money back at the end of the tenancy or accept the deductions proposed by the landlord. 

Of course, there are always the odd exceptions to this rule but let’s get it into perspective – agent or landlord collapses are relatively rare, and where they do occur, the vast majority of tenants are safeguarded regardless of which scheme their deposit is protected by. 

And there is always the responsibility on the part of both the landlord and tenant to ensure that they choose an agent that is part of the SAFEagent initiative, where client money protection is in place should the insurance schemes not pay out due to their rules.  

There is misconception among some people that my|deposits is just for landlords. 

It is true that my|deposits is part-owned by the National Landlords Association who naturally have landlords in mind. We are also part owned by Hamilton Fraser Insurance, a successful commercial insurance business that understands how to operate a robust and successful high-volume transactional operation. 

my|deposits has its own staff and management structure and makes its own decisions both in terms of policy and business practices. Our complaint levels are under 1% of all adjudication decisions, something we are proud of, and well within the acceptable levels for a financial services business. 

my|deposits is popular with both landlords and agents. August was our busiest-ever month for new members, pushing total individual landlord membership beyond 74,000. 

But my|deposits does welcome, and always has welcomed, letting agent members.

Indeed, they make up a large share of the deposits we now protect: 60% of our business currently comes from letting and managing agents, and we now have more agent members (both accredited and unaccredited) than TDS. 

We protect deposits for the largest and smallest agents in the land, and more than 30 new businesses join the scheme every month.

Agents have selected us because of the quality of our customer service as well as our flexible fee model. 

We only charge agents for the actual deposits they protect, rather than through an annual subscription. Our pricing policy has remained stable and consistent over the past five years and allowed us to develop a business which successfully protects tenants’ deposits without costing taxpayers a penny. 

It’s important to clarify a misconception that my|deposits is more expensive for those that protect a large number of deposits, as this is not the case. 

We have many large agent (and landlord) members who protect thousands of deposits with us. Our pay-as-you-go fees and large discounts for those protecting high numbers of deposits means you only pay for what you need.

We believe tenancy deposit protection has helped professionalise the private rented sector and raise standards among landlords and letting agents, and welcome all who want to legally protect their tenants’ deposits while holding on to the deposit money. 

Eddie Hooker is CEO of tenancy deposit protection scheme my|deposits