Deposits versus Reposits: what’s the current deposit system and why does it need changing?

With the tenant fee ban approaching, letting agents across the UK are looking for ways to reduce costs. Yesterday in Property Industry Eye, The Deposit Protection Service and National Approved Letting Scheme recently suggested one way letting agents can save is by using the custodial schemes rather than a more expensive insured scheme.

Whether through a custodial or an insured deposit scheme, over £3billion of tenants’ deposit money is still tied up and held by either the agent or the scheme operator, opening the door for corruption. This money could be used to cover tenant moving costs or at least allow tenants to make interest off it themselves. Luckily, these are no longer the only options available to agents and tenants. Here’s a quick overview of the current system and a look at how Reposit is making renting fairer.

Tenancy deposit schemes: the big three

Under the 2004 Housing Act, landlords/letting agents must protect deposits taken under one of three government approved deposit schemes: the Tenancy Deposit Scheme, Deposit Protection Service or MyDeposits. Most importantly, the deposit must be registered within 30 days or hefty fines apply. These schemes offer both a custodial option and an insured option.

Insured schemes

The insured schemes allow the landlord/letting agent to keep the tenant’s deposit in their own bank account throughout the tenancy. These schemes are popular, possible as the deposit can provide both interest over the course of the tenancy and cash relief for letting agents or landlords themselves whenever needed, which makes this type of scheme very risky. In the event of a dispute the money is transferred to the scheme until a resolution is found and then returned to the landlord/tenant according to the decision.

Insured schemes come with a joining fee and then extra costs for registering each individual deposit. With the onset of the tenant fees ban, these charges can no longer be passed onto tenants and as we know, the smartest letting agents won’t be passing on fees to landlords, so we expect to see insured deposit schemes becoming less popular.

Custodial schemes

With a custodial scheme the deposit is held by the scheme providers themselves, rather than the letting agent. At the end of the tenancy the scheme releases the deposit as long as the landlord and tenant are in agreement.

Custodial schemes are free, as the schemes themselves cover their costs from interest made off the tenants’ deposits they hold.

What’s the problem with using these schemes?

For property managers, the schemes are a paperwork nightmare and in the case of the insured scheme, carry costs which could easily be avoided. Aside from the fees, deposits are an old-fashioned way of letting property which come with a mountain of paperwork hassle and haven’t kept up with the digital age. Further, the money tied up in the system could be put to much better use.

With all of these deposit scheme providers on both insured/custodial the tenant’s money is tied up for the length of their tenancy allowing another business to make money off the interest. Additionally, 97% of deposits are paid back without dispute, proving tenants can generally be trusted to be responsible and treat a property like their own home.

Currently, over £3billion sits gathering dust in these administrative-heavy deposit systems causing a headache for tenants, landlords and agents alike.

Reposit: how and why is it different?

With Reposit the tenant pays one week’s fee instead of up to six weeks’ rent, so they save money and can often move in sooner. There’s no need to worry about registering a deposit or any confusion about who should keep the money between the scheme and the agent.

Plus, the offer of up to six weeks’ cover will remain a standard despite the four weeks’ rent deposit cap announced in the Queen’s speech. Reposit also offers free tenant referencing and incentivises tenants to reduce their fee over time through good property care – if a tenant leaves a property with no charges outstanding their next Reposit fee will automatically go down.

Most importantly, unlike the schemes, Reposit pays the landlord/letting agent commission for each tenancy. For a property with a £1000PCM rent, instead of paying a deposit of up to £1500 on top of rent and other moving costs, a tenant would pay a Reposit fee of only £230 and the property manager (landlord or agent) would receive £50.

Click here to find out more about Reposit

Reposit are now collecting landlord responses for the Landlord Perspectives Survey. Take part and share your insight to help agents improve their services for you.


To make your voice heard and be in for a chance to win please take part by 5pm on Friday September 15th.