Tenancy data from mydeposits suggests landlords and agents are increasingly turning away from insured deposit protection in favour of custodial schemes.
Analysis of figures from Hamilton Fraser-owned mydeposits, which provides both insured and custodial schemes, found the number of deposits put in its custodial scheme was up 24.4% annually last year, while use of its insurance-based alternatives has declined 8.3% over the same period.
This had been a continuing trend.
There was a 48.9% annual increase in custodial deposits left with mydeposits during 2018 but a 3.5% decline in use of the insured option.
The actual numbers from mydeposits show there are still more insured deposits.
Figures from the scheme show it took 453,737 insured deposits last year and 29,427 in its custodial option.
Its insured deposits are still down on 2018 when it covered 494,548 in contrast to the 23,649 custodial deposits it took on.
The data only represents the mydeposits figures. We have asked for figures from the Tenancy Deposit Scheme and Deposit Protection Service, both of which also run the two types of scheme.
The mydeposits research was compiled by Hamilton Fraser business Ome, the soon-to-be launched deposit replacement scheme which will compete with its own traditional deposit options.
Matthew Hooker, co-founder of Ome, said: “There isn’t a huge difference between an insurance or custodial deposit protection scheme from a tenant perspective and both will deliver a certain degree of protection.
“However, it’s clear that the industry is slowly moving away from the insurance-backed protection scheme and this is largely due to a focus on raising standards and increasing transparency across the sector, with landlords opting for custodial schemes in order to provide and maintain this level playing field throughout.
“Poor communication during the repayment of deposits is currently the biggest cause of tenancy disputes so it’s clear that the industry is heading in the right direction by opting for custodial schemes that enforce the need to itemise deductions before the money can be released.
“The next logical step is to provide a trusted, cashless option that not only requires an itemised list of end of tenancy settlements but also requires the evidence upfront.”
Rather than replace Hamilton Fraser’s existing schemes, Hooker said the goal with Ome is to offer choice to tenants.
He said: “Looking into the future, and in the context of a lifetime deposit, it wouldn’t be unimaginable that tenants have the choice as to where they put their money for protection during a tenancy.
“Whether this is with a custodial scheme or a deposit replacement, all options should provide the same fundamental protection and operate to the same minimum standards in order to better the sector as a whole.”