Letting agents using insured deposit protection schemes have been urged to switch to a custodial model in order to compensate for potential losses incurred by the incoming ban on fees.

The plea comes from The Deposit Protection Service (DPS) and the National Approved Letting Scheme (NALS). 

Custodial deposit protection schemes are free for agents, whereas their insurance-based counterparts require a fee.

Custodial schemes hold deposits on behalf of the agent, while insured alternatives allow the agent to keep hold of the money in exchange for a membership fee and insurance fee for each deposit.

DPS managing director Julian Foster says custodial schemes offer a simple solution for agents looking to ‘reduce operational costs’.

”With agents reviewing their business models ahead of the ban, it makes sense to review what deposit protection costs them and their landlords,” says Isobel Thomson, chief executive of NALS.

“By switching from insured to custodial tenancy deposit protection, letting agents could see significant savings for them and their landlords, as well as securing deposits with an entrusted third party to provide landlords and tenants complete peace of mind over the security of their money.”

Meanwhile, ARLA Propertymark has submitted its response to the official consultation for a ban on letting agent fees in Wales.

“Any move to ban letting agents’ fees in Wales will cause unprecedented damage to the rental sector across the country,” says David Cox, ARLA Propertymark chief executive.

“In our submission, ARLA is calling for fees associated with referencing to be left out of any ban.”

“Right to Rent checks will soon be a service that agents in Wales will be required to undertake by law so it is only right that agents should be able to recover the associated costs, given the time and resources needed to carry out such checks,” adds Cox.

The Welsh Government’s consultation runs until September 27 and last month its communities and children secretary, Carl Sargeant, urged tenants to have their say on the proposals.