By Craig Smith
The Deposit Protection Service has recently announced its new plans to setup a new insured deposit scheme alongside its already well established custodial scheme in 2013.
Custodial Vs Insured
The difference between the custodial scheme and the insured is what happens to the actual deposit money. Custodial is exactly what it says on the tin, the deposit money has to be given to the DPS for them to hold securely whereas with the insured scheme, it is simply registered rather than being paid over.
Why Use Custodial?
Prior to 2010 we used to register tenancy deposits with The Dispute Service (TDS) and had to pay a yearly fee in order to confirm our registration. The renewal prices were hiked up so high that many Landlords and Agents were forced to move elsewhere, hence our move to the DPS. (There are too many abbreviations in tenancy deposit protection, or TDP for short!)
By using the DPS, we found that Tenants know that their money is safe and there is no risk of it being used for anything without their say so. Nor can it just happen to be used ‘by accident’ by a forgetful Landlord! One other agent local to us closed down recently which left a number of Landlords and Tenants reportedly losing out on money as the deposits were held in an insured scheme. No such chance if the money is held elsewhere!
Downfalls with Insured Schemes
Now I don’t know exactly how the insured scheme will work with the DPS but it looks as though a Landlord or Agent will not need to pay a registration fee but will need to pay a fee per deposit registered. This seems fair enough but still begs the question, why bother when there is a free alternative?
There seems to me there is no point in holding a deposit in your own account. The amount of money to be earned from interest is barely pennies with interest rates lower than low and the custodial option even offers a free dispute service to boot! Not to mention the extra hassle of having to pay back the money yourself whereas a repayment with the DPS custodial scheme can be done & dusted with the click of a few buttons.
The Future for Deposits
Back in April 2012 the law changed with regards to the registration of tenancy deposits. Any deposit taken for an Assured Shorthold Tenancy needs to be protected and the future surely looks set for further tightening of the protection process.
I can honestly say that I think deciding to use the DPS is perhaps the best decision any Landlord can make. It is free, easy and everybody knows exactly where their money is!
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