Higher rate tenancies had previously not been included under tenancy deposit legislation, which only covers Assured Shorthold Tenancies up to £25,000. Tenancies valued higher than this were seen as contractual tenancies and deposits did not need to be protected.
But this situation, according to The DPS, left some groups such as students or large house-shares vulnerable.
Kevin Firth, Director of The DPS, said: “While it is natural to think of a high value tenancy and conclude that we are in the realms of the rich and successful, often the opposite is true.
“Students, for example, often group up and move into large houses, paying a combined rent that easily exceeds £25,000 annually. People working hard to get through university should be afforded the same protection as young professionals or families renting a smaller house.
“The Government move to expand the deposit protection scheme is the right thing to do and it’s estimated that this will bring another 15,000 new tenancies under the umbrella of deposit protection”.
From October, all tenancies worth between £25,000 and £100,000 will become ASTs automatically and will therefore legally have to protect their tenants’ deposits in a scheme such as The DPS.
Mr Firth dismissed suggestions that the sudden influx of new deposits, caused by landlords having to register deposits retrospectively, would leave the system under pressure.
He said: “I cannot speak on behalf of the other two Government-accredited schemes, but The DPS will easily be able to cope with an increase in deposits from landlords – we’ve demonstrated this recently while taking on thousands more deposits from TDS due to their fee increases. Our business model does not buckle under pressure. We are wholly confident that we will deliver a smooth service for landlords and tenants and can offer total protection for all deposits.”
The Deposit Protection Service is currently protecting more than 530,000 tenants’ deposits, equating to just over £400 million. It is the only scheme that physically takes the deposit from the landlord and holds onto it for the duration of the tenancy. The other two schemes are insurance-based.
Have your say on this story using the comment section below.