Thousands of landlords may need to re-evaluate their approach to tenant deposits if proposed government reforms are implemented. The government has indicated a potential move to discontinue insurance-backed deposit schemes, though these changes are not yet legally enacted.
Industry experts are urging landlords to understand their available options and assess potential risks before any new regulations come into force. Currently, two types of insurance-based schemes exist: traditional insurance-backed deposit protection, where landlords hold the deposit and an insurance policy provides protection, and deposit replacement products, where tenants pay a fee instead of a cash deposit.
Propertymark, an industry body, is advising landlords to begin preparing by understanding the various options. Henry Griffith, senior policy and campaigns officer at Propertymark, stated that the potential ending of insurance-based deposit protection schemes would necessitate some landlords reviewing their current arrangements. He emphasised the importance of distinguishing these from deposit replacement products.
Mr Griffith also noted that deposit replacement products could become more widely considered by landlords seeking alternatives, but cautioned that they are not universally suitable. Factors such as affordability, tenant demand, protection levels, fees, and dispute handling should be carefully considered.
The National Residential Landlords Association (NRLA) has confirmed that landlords can continue to use existing deposit arrangements until any further changes are confirmed. A broader review of the tenancy deposit system is anticipated to commence in 2027.