The end of the insured deposit? Agents and landlords turning to custodial schemes

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.”


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  1. JamesB

    I would never use custodial schemes.. far too easy for tenants to refuse any deductions even if correct to see if the biased adjudication process goes in their favour if the landlords side hasn’t done everything correct with processes .. too many traps set to trip up landlords and agents

    1. Bless You

      Reporting in % figures should be illegal.

      What % of the market is it.

      £500 up from £250 is still a 100% increase.

    2. Woodentop


  2. flockfollower102

    The comment from JamesB is exactly why the industry should only use custodial. All the schemes use arbitration, but the comment above would suggest that atleast one person ignores that process and makes deductions as only they see fit. This sort of thing only puts the industry into a bad light and reduces trust.

    1. JamesB

      Absolute rubbish and incorrect assumptions

      you miss the point completely or have only ever dealt with model tenants ..

  3. LongInTheTooth75

    In my experience, some tenants will find any way they can to avoid their responsibility to look after the property. Also in my experience the arbitration scheme will always find in the tenants favour despite all of our representations.

    Forgive me for having been in the business for over 40 years and not being prepared to clean out tenants rubbish and put smelly bin bags in the back of my car, its their laziness, its their rubbish, if they cant take it away then i have to get it done. Clearance companies are not charities, neither are we, someone has to pay. Go to TDS/DPS etc arbitration and 9.5 times out of 10 they weill find in favour of the tenant.

    1. Woodentop

      Nonsense. If you do your job right in the begining and can show you are entitled to a legitamate claim you will win with DPS. Far too many old wives tails about custodial from those that lost by their own failings, particulary when it comes to new for old.
      The reason why people do not like custodial … they can spend it, but they still have to go through adjudication!!!!!!!!!

      1. JamesB

        You clearly have limited experience of claims and what tenants get upto or work in an area where it’s just dream tenants 

  4. Eric Walker

    JamesB – are you suggesting that the adjudication process is different with an insured scheme? I have dealt with a number of disputes recently where the agent uses the entire deposit as leverage over a relatively small sum of money. One landlord withheld £1400 until the tenant agreed to a £150 deduction for something which actually cost £50.

    Most landlord / agent claims fail due to lack of proper, independent evidence not bias. A proper independent inventory & schedule of condition is essential or any claim is likely to favour the tenant.

    1. KByfield04

      Indeed Eric- it is the Tenant’s money and the onus is on the landlord/agent top substantiate their/our claim (if not readily accepted) which is exactly as it should be.

    2. JamesB

      No the process is the same on both .. the point I make is you make a fair deduction on a insured scheme and tenant walks away if it’s fair and can’t be bothered to dispute 
      you make a fair deduction on a custodial and if tenant is the type it’s just to easy for them to click no and then it’s a dispute which the landlord must spend many hours processing and supplying info etc, tenant just writes anything in a brief tale and can try their luck .. minutes for the tenant many hours for the landlord even when he’s completely fair and correct 

  5. KByfield04

    With banks paying little to no interest, the appeal of a Custodial Scheme is a zero-cost solution whether you are an agent or Landlord. However, as this figure rises an insurance backed scheme does become more commercially viable and if you can keep disputes down then fees are reasonable.

    Tackling a lot of these issues (focusing on transparency, communication and evidence-backed deductions) has been one of our primary objectives in the development of The Depositary in partnership with TDS. We are currently partnered with their Insured scheme but a meeting withy TDS at their HQ on Tuesday has confirmed we will be partnering with their Custodial Scheme too. They are seeing good growth in this service but most of that, as I understand, is migration from other offerings to TDS.

    We have used the platform for testing for the last 16 months or so at base (my agency)- in that time we have seen 87.5% of tenancies conclude with agreeable deductions, and 12.5% conclude with no deductions with no dispute filings in that time. What is more, we are currently seeing a tenant satisfaction rating of the platform (which just takes a tenancy from post-notice to refund and/or dispute) at an amazing 90% with tenants giving feedback that they understood the process, steps & timelines and found our evidence-backed proposed deduction process factual, fair and professional. Our median average for deposit returns is 22 days from the Check-Out date and overall average 24 days (based on 160 concluded tenancies to date).

    The 11 agents we have done demos for in the last 10 days have all instantly recognised what we have built and we hope the 20+ demos booked will continue that trend. We are excited to deliver some genuine transformation in this space in terms of operational efficiency for agents but also in terms of the experience tenants get and, as a result, an improved opinion of both agents & landlords.

    1. 2020 Vision

      There is too much emotion tied to tenancy deposits. 
      Having been exposed to them both personally and professionally, I think the amount of time (and money) saved by abolishing deposits, will outstrip the average end-of-tenancy deduction. 
      The deposit mechanism is so deeply flawed that any service derived from deposits (TDPs, replacement schemes, The Depository) serve to highlight the flaws, rather than fix them. 
      Deposits – cash-intensive for renters, time-consuming for landlords, income opportunity for startups.


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