Sir, There are two types of scheme under the Government’s plans for protecting tenants’ deposits in England and Wales (report, Jan 21). One is a custodial scheme (where deposits are paid into and held in a separate account) and the other one or more insurance-based schemes (where the landlord or agent retains the deposit and any failure on their part to repay it to the tenant is covered by the scheme’s insurance arrangements).
Landlords will have the option of choosing the custodial or an insurance-based scheme. If a landlord joins an insurance-based scheme, a membership fee will be charged by the contractor. The custodial scheme will be free to landlords, letting agents and tenants.
It is therefore not correct that “private landlords (are) to lose control of tenants’ deposit” nor that landlords “are to be barred from keeping deposits”.
Of the more than £740 million paid by tenants as deposits on assured shorthold tenancies, we expect some £180million-£200 million to be subject to one or more insurance-based schemes, leaving an expected total deposit pool for the custodial scheme of £500million-£600 million.
To avoid disputes going to the courts, both schemes will provide a voluntary alternative dispute resolution service.
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The new scheme will help to ensure that where a tenant pays a deposit to a landlord in good faith, it will be returned at the end of the tenancy, provided that the tenant does not cause any damage or theft to the property.
BARONESS ANDREWS
London SW1