Housing Act 2004 – Revision of Tenants Deposit Protection (TDP) Legislation

The idea

To revoke the provisions of The Housing Act 2004 as they relate to tenants deposit protection (TDP). In particular the current structure that compels CLG to need to license two types of scheme – 'insured' & 'custodial'. This should be replaced with amended clauses to enable circumstances that would allow for CLG to procure and license a single authority / scheme provider, who may if they choose, offer both types of scheme from a single administrative / ADR base. Further, that the ‘custodial’ element to be provided by that single authority, though normally free to use, will be empowered to charge a fee for usage in circumstances where, at times of low interest rates, the income generated were deemed to be insufficient to cover the operating costs of the scheme.

Why is it important?

Summary: Significant cost savings for Government Dept (CLG), ease of use for the public / users, consistent determinations of disputes, elevation of the public perception of the PRS, a single statistical data base from which Government can determine current and future housing policy.

1) Having been personally involved in the formal procurement process for the ‘insured’ versions advising Government consultants 2005, that was orchestrated and overseen by the then ODPM – pre CLG, in my view the procurement was profoundly unsatisfactory and has caused a number of problems in that :

a) it misguidedly ignored the fundamental procedural differences between circumstances where landlords hold the tenant’s deposit themselves and those where the deposit is held by the letting agent.

b) by insisting that the two insured  schemes currently operating, mydeposits & TDS Ltd should be available to both landlords direct and letting agents, it has arguably created any number of anomalies including public confusion as to who the schemes indemnify plus ‘windfall’ profits for one of them and, allegedly due to CLG procedural rules and possible fundamental underwriting failures, the apparent virtual financial failure of the other – its survival is still open to conjecture.

2) in allowing the single ‘custodial’ provider to levy a fee at times of low interest rates, it would remove the financial risk to whoever is expected to underwrite any shortfall i.e. Government or provider.

3) by having a single provider, a tenant would not have to ‘trawl’ around three schemes to ensure that their deposit was protected as prescribed by the Act. Thus saving them significant time, money and effort.

4) having one scheme administrator would allow for a single ADR which would provide a national consistency to dispute determinations. That in turn would enable the scheme to be much more prescriptive in the evidential requirement, thus providing and establishing a national standard.

5) by having a single provider, CLG would only have one supplier interface instead of three and thus reduce their costs dramatically.

6) the k.p.i.’s would be far easier for CLG to monitor

7) although the Housing Minister has currently ruled out the formality of ‘regulation’ of the letting industry / PRS in general, if there were to be circumstances in the future where that attitude were to change,  then a single TDP provider would form an excellent conceptual and administrative base from which to base and launch such an initiative.

8) the appointment of a single scheme/s provider without the historic influence of professional / trade bodies but with an elevated ‘institutional’ financial  presence, would undoubtedly improve the public perception of the PRS as a whole.

Conclusion:

Whilst the proposer of these changes fully recognises the fundamental objections that many landlords and agents have for the TDP provisions of the Act as whole, there seems no doubt that the TDP concept is sound and was well received by consumer groups and the public alike. What is clear is that the current 3 supplier arrangements are confusing, unwieldy and in some cases completely misleading to the point of being unsound. I believe that the changes proposed would be welcomed for the reasons stated. However I have no doubt that there will be considerable adverse comment.