Abolish tenancy deposits, says agent, to release £3.2bn into economy

A lettings agent has called for deposits to be abolished, saying it would release money into the economy and help stamp out rogue landlords and agents who help themselves to tenants’ money.

Ajay Jagota, of lettings agents KIS, which provides an insurance policy rather than taking deposits, says others should follow suit.

He says this would free up cash locked in deposit schemes, adding: “Study after study concludes that they are the biggest barrier to entering and moving house in the private rented sector, with our research showing the average renter needs to stump up more than £1,000 to get the keys to a new home before they’ve even paid the first month’s rent.

“But time and time again policy-makers ignore this in favour of the same old cul-de-sacs and clichés like banning of letting agent fees or rent controls.

“Not only would abolishing deposits mean the £3.2bn being release into the wider economy, £2bn of which is literally just gathering dust and interest right now, it would make it easier for renters to move house, easier for them to keep a house and easier for them to save for a property of their own.

“A survey recently showed that 78% of renters want greater protections from their landlords – this is the simplest and most effective way of giving them that piece of mind.”

Rather than the tenant paying a deposit, landlords using the KIS scheme can pay a fee to get cover of up to £7,500 for either six or 12 months. The policy is underwritten by insurer Dlighted.

For example, six months of cover worth up to £2,500 costs £99 for six months or £129 for 12 months.

If they wanted £5,000 to £7,500 of cover they would pay £249 for six months and £279 for 12 months.

This policy can be used to cover rental arrears and can also be used for claims of up to six weeks’ worth of rent for malicious damage.

There is also recourse within the policy to take legal action against tenants if necessary.

It comes after Southampton Labour MP Alan Whitehead earlier this month raised a question on government efforts to crack down on rogue lettings agents.

Speaking during Prime Minister’s Questions, when Chancellor George Osborne was standing in, Whitehead said: “A Southampton letting agency has recently been banned from trading for three years for not giving tenants their deposits back and using them for other purposes.

“The situation, however, as far as letting agents are concerned, is that they are almost completely unregulated and it’s pot luck whether Southampton residents actually get a fair deal from their letting agents or not.

“Is the Chancellor intending to do anything about this?”

Osborne simply replied that the Government looking at consumer protection for tenants.


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  1. Will

    Are these people on planet Zog?  I have just taken back a property where the tenants, a nice family, have left the property filthy after being there for four years. The have hoovered and mopped the floors and feel the dirty carpets, dirty curtains, walls, tiles, holes in walls, mould on walls due to not airing the property etc etc is down to fair wear and tear. Yes there deposit will be eaten into.  Leaving it to some sharp practice insurance company who focus on not paying claims would not be the way forward for fair settlements. There is legislation in place on deposits – enforce it!!!!!!!!  I guess these fat cat MP’s have nothing better to do than fill their day constantly attacking the vast majority of good landlords. Bizzare, they attack those they need to house people they have made homeless by selling off council housing and now proposing to sell off housing association property at knock down discounted rates which had been purchased originally with OUR taxes.  It seems Mr Alan Whitehead must be deeply challenged “to make comments such as letting agents are almost completely unregulated”  More hot air and bluster. Perhaps he should get a real job.

  2. Rickman2154

    I have never heard so much nonsense in 30 years in this business, No Will, this chap cant be from this planet!! Mr Alan Whitehead should sit in our management department for a day and go out on several inventory check-outs!! The pleasure is mine.

  3. JSSoxted58

    I think there is an area for discussion here, I do believe the deposits should be reconsidered in favour of some kind of insurance policy as it would make it far easier for a tenant moving from one property to the next to just transfer their deposit insurance such as Rent4sure’s Tenant Liability Insurance, making it easier for people to rent and also giving flexibility for landlords to consider rental increase yearly.  The insurance is more affordable and can be transferred to another property at the end of the tenancy.

    However, there needs to be an effective way for landlords to claim against damages without the worry of not being paid out for unclean houses, damaged carpets and the like.  Perhaps a simple joint agreement at the end of the tenancy whereby if they both agree deductions, insurance companies will automatically pay out the agreed amount?  Or alternatively the DPS should look at taking an initial fixed amount in line with the rental and being able to transfer it to the other property when the tenant moves on, it is too difficult for tenants to find yet another deposit to move into another property before their deposit is released?  This needs to change we just need to find a way to change it to suit everyone.


    1. Gloslet

      ‘insurance companies will automatically pay out’ ! The whole reason that insurers are in business is that they do not pay out and certainly not automatically.

      The reason that landlords take deposits is that it helps to ensure that the tenant retains a vested interest until the end of the legal contract. If there is nothing at risk for the tenant, there is no financial tie-in for them to pay the final rent, for cleaning, gardening, etc that may be required.

  4. Romain

    Perhaps this letting agent should be reminded that he works for landlords, not tenants.

  5. Mark Walker

    A dispute service dealing with a deposit has no financial conflict between landlord or tenant.

    An insurer is not going to be keen to pay out in a dispute.

  6. Mark Walker

    Dear Ajay,

    I am very confused.

    I have seared for 2 properties on kis.co.uk and they both came back with details including deposits.

    Help me out here.

  7. ajayjagota75

    Ladies and gentlemen it’s good to read your comments debating the article.

    I will endeavour to answer some of the questions raised and attempt to address the general misconceptions surrounding the propostition.

    Firstly KIS is a letting agency that has been operating in he North East utilising a no deposit approach to all our managed properties for approx 7 years. In that time we have been working with the insurance industry to develop a product that negates the need for a tenant to provide a monatory Deposit whilst still protecting both ourselves and our landlords.

    Figures from 2015 show there is £3.2Bill in deposit schemes, with £1.1bill in custodial and £2.2bill in the insurance schemes. In the case of the custodial scheme the interest earned from the “tenants deposits” is used to administer the schemes offering a free to use service, however under the insurance scheme the “tenants deposits” interest is used by the holder of that depsoit which for some operators is a six figure sum.

    My personal view is the current process of taking monetary deposits is now outdated and in need of reform. If we as consumers hire a vehicle we are not required to pay a substantial amount of money to mitigate risk we as a society in many sectors (apart from the PRS) accept the use of an insurance policy to mitigate against risk. Does the fact that a person has an insurance policy when hiring a vehicle mean that they become a reckless driver?

    In the current schemes the disputes ratio is 3% so 97% of these deposits are simply handed back, the metrics on the Dlighted (deposit replacement insurance) product shows the claim ratio at less than 3%, evidence that taking a monetary deposit has no bearing on the performance of the tenancy. The use of the insurance means any decision made is not subjective it is an objective view e.g. there is damage to the property and there is evidence on the inventories to substantiate a claim. No decision to proportion blame is necessary as is the case with monetary deposits. The claims history is captured to de-risk the market for all stakeholders unlike the current schemes. As stated in the article the policy not only protects against damage but also rent guarantee and legal expenses offering greater protection than the current taking of a deposit.

    A thought to leave you all with, tenants are consumers, there is an affordability issue in the PRS, we as a sector can choose to ignore it or embrace positive change.

    P.S. Do not forget the Tech sector understands the “consumer” whom we as a sector have been complacent with due to high demand for tenancies, the corporates however have recently embraced the Tech sector with numerous collaborations, ask yourself why?

    Regards Ajay Jagota


    1. ajayjagota75

      * http://www.Dlighted.co.uk


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