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It was recently revealed that the government is considering the idea of a deposit passport for tenants when they move from one property to another.

The concept behind deposit passporting is that a tenant’s deposit would follow them from property to property, removing the need for fresh deposits every time a renter moves home.

Typically, tenants moving between rental properties will have to pay a new deposit before receiving their existing one from their previous landlord, which can lead to affordability issues.

What is being proposed?

In late June, a call for evidence on tenancy reform was issued by the Ministry of Housing, Communities and Local Government, letting agents and all other interested parties were invited to put forward suggestions by early September, when the consultation closes. MHCLG said in a statement: “More than four million people live in the private rented sector, yet when moving home, some tenants can find it a struggle to provide a second deposit to their new landlord – risking falling into debt or becoming trapped in their current home. Ministers want to understand the scale of this problem.”

It added: “Ministers are inviting proposals to make it easier for renters to transfer deposits directly between landlords when moving from one property to the next. Freeing up deposits and allowing a renter’s hard earned cash to follow them from property to property – as they move to take that perfect job, to move nearer to family, or find a place that suits their changing needs – will create a fairer housing market that works for all.”

In a foreword to the 35 page call for evidence, Former Housing Secretary James Brokenshire, who has since been replaced by Robert Jenrick as a result of Boris Johnson’s first reshuffle as Prime Minister, said: “I am committed to making the process for tenants getting their deposit back much smoother.”

“I want to understand whether there should be a deadline for landlords returning deposits. I also want to look at whether existing initiatives are meeting tenants’ needs and whether the market can offer improved products. Alongside this, I want to look more widely at whether innovative approaches to helping tenants move more easily, including allowing tenants to passport their deposit between tenancies.”

Will deposit passports be introduced?

We won’t know for sure until the findings from the call for evidence on tenancy reform have been analysed, which is unlikely to be for a while yet given the deadline itself isn’t until early September.

It’s also important to remember that a whole new government is effectively now in place, with Boris Johnson taking over as Prime Minister and carrying out a significant reshuffle.

There was a major makeover for MHCLG, too – not only did Jenrick replace Brokenshire, former Work and Pensions Secretary Esther McVey replaced Kit Malthouse as Housing Minister and Luke Berry, MP for Thornbury and Yate, took over from Heather Wheeler as junior housing minister.

The idea of a deposit passport, where tenants can transfer deposits between tenancies, is a strong one and likely to have considerable public support – particularly among those who rent. As such, there is a good chance something like this could come into play further down the line.

What are the alternatives for landlords and agents?

Landlords and letting agents should also remember that there is a range of alternatives available, allowing them to bypass the current deposit system. Over the last few years, there has been significant growth in the deposit replacement or nil deposit sector. These schemes require tenants to pay a non refundable fee, usually equivalent to around one week’s rent, instead of the more traditional upfront refundable security deposit.

One such scheme is flatfair, a deposit free alternative which enables tenants to move without the financial burden of finding a new deposit, while still providing landlords with the peace of mind and protection that they require.

With flatfair, tenants pay a small one off membership fee and landlords get 12 weeks’ rental protection, which works out at double the security compared to a traditional deposit (even when considering the recently-introduced security deposit cap).

At the end of the tenancy, tenants are still accountable for any damages or unpaid rent with costs settled between both parties, meaning landlords are still protected.

By referring tenants via Rentshield Direct, letting agents will receive a % revenue share from each sign up.

Deposit alternatives can provide a win win situation for all parties, as tenants pay a small one off fee and then at the end of the tenancy, any additional charges can be dealt with fairly and quickly.

It’s clear that alternatives to tenancy deposits are growing in popularity. However, it’s up to agents and landlords to decide which system they feel more comfortable with.

Tenant referencing will remain crucial

Whatever happens in the future, it won’t take away the importance of tenant referencing – a vital part of any successful tenancy and a great way for letting agents to provide landlords with peace of mind by knowing that they have excellent, reliable tenants in place. It also limits the chances of void
periods and rent arrears being an issue.

Thorough tenant referencing should include comprehensive credit checks and financial and landlord references, to establish a tenant’s credentials and ensure that they can afford their rent for the entirety of the tenancy.

  • A good tenant reference should include:
  • A credit check, giving a good indication of whether a tenant has been consistent in paying their bills and debts reliably and on time.
  • A check of the electoral roll, confirming that the tenant lives where they say they live.
  • An application consistency cross check, which alerts the agent if the tenant has submitted multiple applications.
  • Bank account validation – checking that a renter’s bank details are for a genuine UK based account.
  • A search for undisclosed addresses, revealing any addresses that the tenant has lived at but failed to disclose. Such a check can uncover any adverse credit that the tenant may not have been upfront about and also acts as an indication of the tenant’s honesty and integrity.

Although deposit passporting is a potentially excellent way for tenants to save on costs when moving,and ensuring tenants aren’t left out of pocket when switching properties, it doesn’t prove who a tenant is or how likely they are to pay you their rent on time.

This is where tenant referencing becomes so important, and we can help agents to get this right for their landlords.

You can find out more about Rentshield Direct’s tenant referencing services here. We have been referencing tenants since 2005, demonstrating that we have the know-how and experience to ensure it’s done properly.


Deposit passports for tenants – could this be the future?