A look back over 10 years of tenancy deposit schemes
Steve Harriott, Chief Executive of TDS, looks back at ten years of tenancy deposit schemes. While it’s been ten years since tenancy deposit schemes were first introduced in England and Wales, TDS has been going a fair bit longer. RICS and ARLA formed The Dispute Service in 2003 to operate a voluntary tenancy deposit scheme for regulated agents (TDSRA).
While it’s been ten years since tenancy deposit schemes were first introduced in England and Wales, TDS has been going a fair bit longer. RICS and ARLA formed The Dispute Service in 2003 to operate a voluntary tenancy deposit scheme for regulated agents (TDSRA).
The 2004 Housing Act made tenancy deposit protection mandatory and deposits started being protected from April 2007.
There was a feeling amongst landlords at the time that disputes were going to be commonplace – the norm even and that the schemes would be overwhelmed with disputes. That avalanche of disputes didn’t materialise.
Most tenants are decent people and want to look after their home and protect their deposit. And similarly most landlords are decent people who want to provide a safe, secure home for their tenants. The evidence shows that the overwhelming majority of tenancies have no problems that end up in a dispute.
This fear that disputes would clog up the county courts is why all the tenancy deposit schemes were required to offer free ‘alternative dispute resolution’ which reviews cases long before they go anywhere near a judge.
The formalisation of arrangements for deposits have seen standards being raised. Tenancy agreements, for example, are now much better worded, with explicit deposit use clauses. We’ve also seen a much greater use of professional inventories, check ins and check outs.
Our own TDS Charitable Foundation has been directly involved with improving the sector with funding given to such initiatives as training for landlords, students and young people.
There’s also been the improvement in arrangements for the handling of monies by agents with the spread of client money protection schemes. The Westminster government, only recently (March 2017) announced it intends to make CMP mandatory for all letting agents in England, following the examples adopted in Wales and Scotland in recent years.
TDS has been investing heavily in software development and have pioneered online evidence portals for disputes which do away with paper-based systems. It’s something that has been universally well received and we now use this in all of our schemes: TDS Northern Ireland, the Tenancy Deposit Scheme in England and Wales and in SafeDeposits Scotland.
Looking ahead, could there be fundamental changes to tenancy deposit schemes? Possibly. Whilst the numbers suggest that most landlords and agents prefer insurance-backed schemes, there are others who feel that the custodial model is safer as deposits are held by us directly.
TDS’ business is largely in insurance-backed schemes but, responding to the market, we launched our custodial scheme last year in England and Wales and have seen steady growth in this part of our service. Many agents don’t know that we offer TDS Custodial so expect to hear a lot more noise from us in the coming months; agents and landlords do have a choice if they want to use custodial!
Could deposit replacement insurance products gain traction? We’re seeing a rise of these, particularly in London where deposits can be many thousands of pounds but we haven’t yet seen a policy that works from a landlord’s point of view.
A decade after tenancy deposit schemes were first introduced I can wholeheartedly say that I feel the private rented sector is better for them. There is more security for both tenants and landlords that deposits are safe, there’s a quick and easy way to resolve disputes, tenancy management standards have improved, there is a growing acceptance of the value of client money protection and the adoption of new technology is driving down the costs of deposit protection. I am looking forward to the next ten years!