Changes in the Deposit Registration Process

OpenRent Chat
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I recently checked my account on the mydeposits website and found that a deposit for one of my properties was not showing. I contacted my deposits, and they advised me to take the matter up with OpenRent as they were responsible for registering the deposit.

Contacting OpenRent they replied …

"Thanks for getting in touch and sorry to hear of any confusion with this.

Whilst we understand your previous tenancies have used mydeposits custodial scheme, we have now updated the deposit protection we use for our Rent Now service.

Deposits are now protected in OpenRent’s account with mydeposits as is outlined in the contract that has been signed by all parties. The deposit will be held securely in our client money account under protection from mydeposits.

At the end of the tenancy, you will be able to use your dashboard to return the funds to the tenant or claim any deductions. There’s no action required from your side at this stage, and all the details will be available under your OpenRent account when you need them at the end of the tenancy."

My reply clearly states my opinion on this …

"Thank you for getting back to me so quickly. I must object in the strongest possible terms to this change in policy. Why are Openrent now getting involved in the deposit process? I contracted with you to find a tenant and draft the tenancy agreement, and once signed, collect the first month’s rent and deposit and register the deposit IN MY ACCOUNT with the deposit protection service, wherein your involvement with the tenancy ends. Instead of having three parties involved with the deposit process, we have four … the tenant, the landlord, the deposit protection service and Openrent. Openrent has no reason to be involved, and this only adds complications. I can only surmise this change was made because having the deposits registered in your account with the deposit protection provider enables you to earn interest in the monies whilst held in deposit. I will be taking legal advice on this matter!

I am deeply disappointed by the recent changes that have been implemented without prior communication to landlords, your clients. This is the second significant change, the first being the introduction of insurance instead of deposits with REPOSIT. It seems that landlords will now have to meticulously review the contract every time they have a new tenancy to ensure they are aware of any changes. It appears that these changes are being made solely for the financial benefit of OpenRent.

Could you please clarify how the deposit refund process will work under the new policy? If the deposit is not registered to my account, I assume I will have to notify OpenRent instead of the deposit protection provider. This means that you will be alerted to the termination of the tenancy, a situation I would prefer to avoid.

By making such changes, you have lost my business moving forward. I will, in future, only use your advertising service and avoid using your intrusive tenancy creation service!

I must insist on communication from mydeposits to confirm that they are holding a deposit in the OpenRent account for the relevant tenancy. Otherwise, I have no evidence of a deposit being correctly registered. You have ten working days from receipt of this message to comply; otherwise, you will hear from my solicitor."

Are no other landlords concerned about this, where OpenRent is intrusively getting involved in the tenancy process will beyond the services it proports to provide?

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I subscribe to a blog by Suzanne Smith “The Independent Landlord.” and she until recently used to endorse Open Rents, Rent Now but she has retracted her endorsement over this very same issue. She is a landlord with a legal background and has written to Open Rent and is awaiting their response.

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Whilst this is quite old news, and has been discussed on this forum previously, I too was not happy that Openrent failed to communicate the change in policy to Landlords. If they are confident that the change brings advantages to Landlords, I do not see why they don’t promote it.

I was however, not aware of any change to REPOSITS.

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My reference to REPOSIT was that some years ago they were introduced as an option in the tenancy agreement without prior notification to landlords. As such I ended signing an agreement that used the REPOSIT insurance scheme as opposed to a custodial scheme and this did not go well. Landlords should avoid insurance schemes as the insurer will want to avoid any payout since any claim will be a loss to them, as no deposit is paid, only a far smaller insurance premium.

OpenRent are not living by there mission statement…

“Be open, be honest, be user friendly. Provide users with as much information as possible, wherever and whenever”.

They have transitioned from a let’s make things better startup to a greedy corporate mentality.

My advice to all landlords is NOT to purchase the “Rent Now” package.

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I would also urge all landlords to carefully read OpenRent’s term and conditions. Whilst they now are the controlling and most influential party in the deposit process, in their terms and conditions they do not present themselves as a party to the tenancy agreement merely a “Disinterested trusted third party”. Disinterested in this legal context means they have nothing to gain from the contract. I think this can be legally challenged since they also state in the same terms and conditions “OpenRent will retain any interest earned on Deposit monies held in the client account.”

Finally, they absolve themselves of any and all liability resulting from the use of their services. Good luck to you trying to challenge them legally!

Avoid the “Rent Now” package!

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I asked OpenRent if as part of their “fully customisable” tenancy agreement the landlord can change the deposit to a custodial scheme under an approved deposit protection provider? There reply …

“I’m afraid not. Where you use our Rent Now service to arrange a tenancy, the deposit is protected in OpenRent’s account in a government-approved deposit scheme.

Where eligible, tenants can also opt to use Reposit deposit replacement. You can see more here: https://www.openrent.co.uk/kb/articles/360028373692-Do-you-support-Nil-Deposit-schemes

Our service is unfortunately not compatible with a custodial scheme in which you (the landlord) hold the funds for the duration of the tenancy or an alternative provider.”

So my final position/response to OpenRent is …

“ I’m sorry to say that moving forward you have lost my business. As a landlord I do not accept any form of deposit replacement. These are insurance schemes, where the insurance provider is not a “trusted disinterested party” having an interest to reduce as far as possible any payout.

By restricting the form of deposit you are overstepping your remit as a letting agent, surreptitiously and intrusively controlling terms for your financial gain. The choice of the legal deposit scheme to be used should be decided by the landlord.

I’ll be using 99Home. They offer exactly the same service as OpenRent, but with a custodial deposit. They are £10 more expensive than OpenRent but that is not an issue for me.

Moving forward I’d like your confirmation that all data, information you hold on me and my tenancies is deleted.”

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If there are active tenancies then you would need to ensure that they are transferred, (including the deposit) rather than just deleted.

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I have one active tenancy that incorporates the new OpenRent deposite scheme. I will only delete my account once this tenancy ends as I do not want to risk any issues for me or the tenant in the process of transferring the deposit.

I must admit I have to admire OpenRent for their ingenuity, not their ethics, as this new process makles it far harder for the clients to leave them!

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It sounds like open rent are targeting those tenants that high street estate agents refuse
That is the ones with no equity / social housing applicants and you will have to filter those much more
They also seem to be tenant orientated forgetting that we are actually the paying customer
With s21 about to disappear is this the right way forward

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I am sure Openrent will respond to this

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The response from OpenRent …

Thanks for your email and sorry to hear that you are concerned regarding this.

OpenRent has been around for over 12 years and is extremely well-capitalised and subject to very extensive controls and regulations, so the risk of the company going out of business is extremely remote.

However, please rest assured that even if this did happen any funds that we hold would still be protected in a number of ways.

All tenancy deposits held by OpenRent are held in a separate client money account. Like all letting agents, OpenRent is required by law to hold comprehensive client money protection insurance. OpenRent’s CMP cover is provided by Propertymark. FAQs | OpenRent

In connection with our CMP insurance, we are also subject to extensive auditing and checks on financial controls.

In addition, by their nature, all insured tenancy deposits are protected by the mydeposits scheme so customers receive full protection under UK law. You can use the link below to enter the property postcode, the month and year the deposit was protected and a tenants surname to confirm the deposit is protected: https://www.mydeposits.co.uk/tenant/

I’m sorry to hear we’re losing you. There’s no charge or commitment for keeping your account, nor do we send out emails without purpose / instruction.

My response …

Thank you for your message. I understand your perspective, but I believe there may be a misunderstanding. My concern is not about the possibility of OpenRent going out of business or the security of the money in the client’s money account. That is not the issue.

To be clear so you understand my position, it is:

I do not like or agree to have any tenancies with any form of insured deposit replacement scheme, be it REPOSIT or your proposed scheme. An insurance scheme is excellent for cash-strapped tenants, who only need to pay a relatively small premium. However, for landlords, it is not very attractive. Firstly, if a tenant cannot afford to pay the deposit, what does this infer about the tenant’s ability to pay the rent? Secondly, as I stated, the insurance provider is not a “trusted, disinterested party” being motivated to reduce any claim payout as much as possible. This is standard practice for insurance companies.

The OpenRent deposit scheme is even worse for both tenant and landlord. The tenant pays a full deposit to OpenRent, which OpenRent keeps in its client account and earns interest on. This interest earned is not returned to the tenant. If the tenant were to pay the deposit directly to MyDeposits or DPS, the interest earned would be paid back to the tenant at the end of the tenancy, which is a legal requirement. Your scheme surreptitiously circumvents the rules and denies the tenants interest on their money. You are stealing from the tenants, most of whom will not realise this. This may not be illegal, but it is unethical behaviour and something I want no part of. Furthermore, I do not agree to the disclaimers in the OpenRent Terms and Conditions. As mentioned, earning interest on the tenant’s deposit makes you an interested party.

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how do you know openrent keep the interest generated?

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It’s clearly stated in their terms and conditions. I urge you to read them!

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I use an agent high street type.

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How can OpenRent be tenant oriented, when they take a full deposit from the tenant, but unlike the government accredited Deposit Protection Agencies, they keep it in their own account, earning interest, which they do not give back to the tenant? By law the accredited agencies MUST return the deposit PLUS any interest earned. OpenRent have found a loophole in the rules, enabling them to keep the interest earned from the deposits they have collected. They are taking advantage of the lack of knowledge of the average tenant. Why would a tenant agree to OpenRent’s deposit policy, paying them a full deposit, only to receive an insurance type coverage and lose the interest? They could take out a custodial deposit directly with an Accredited agency and gain the interest earned upon the return of the deposit at the end of the tenancy. Alternatively, they can take out a deposit replacement insurance, paying around one week’s rent, if they cannot afford the full deposit. By accepting the OpenRent deposit scheme, they pay the full deposit, but only get the insurance terms.

The OpenRent deposit scheme only benefits OpenRent and is worse for both the tenant and the landlord!

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By all means do so. Online agents are cheaper however, and in my experience (all with OpenRent, until they changed the deposit scheme) offered a very good service based on speed and convenience.

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I didn’t realise that was what openrent were doing .

Is this not a matter that can be raised with their ombudsman ?

OR have to earn money to run if they advertise for free ( I only use them as a platform to advertise).
They are an estate agent after all. Ethically / morally run lettings would be an oxymoron …. No???

If what you say is correct then (and I understand correctly),
If they are buying insurance policies then are they helping the tenant because the tenant will always get a full deposit refund no matter what the damage . That will pass on as positive reviews by a tenant …
The landlord will never have access to the deposit and be left footing the damages as you are essentially dealing with a piece of paper not actual money .

I would never allow a deposit in a third party’s name hence why I never used the platform for rent. They are looking for less weathered or more hands off landlords ( eg those abroad, working full time in another job)

Interest accrued from deposits was raised here before .
I can’t remember what exactly I read but
Custodial schemes were set up so that they could run off interest accrued on deposits , that’s why they don’t charge vs insurance schemes that do charge.

What I read and understood was that the interest , if stipulated in the terms and conditions , can be kept by the landlord/ scheme

As a landlord you can keep all the interest if you have it in your contract .
Open rent must have that in their T and C that they earn interest on deposit money and will keep interest otherwise they are in deep water and would owe people a lot of money .

DPS stipulate that they keep an amount of interest ( I can’t remember off the top of my head the number . I don’t think it was the full amount of interest )
When inflation was low the tenant never earned interest because it was kept by DPS as part of their T and C

I am not sure what happens now as I don’t use custodial but since Truss tanked the economy and interest rates increased they may earn interest and keep what they specified they would

TBH since the spat with rightmove I changed to quickister as I found their service impeccable
There is watts app contact within less than an hour and communication is easy.

Open rent , if you just use it to advertise, does not require proof of ownership, as some people have suggested ( I have just advertised a new listing with no proof ) so anyone can post a listing

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Omar. Your explanations appear to keep mixing up Mydeposits Insured scheme, and the Reposit Deposit Replacement service.

Openrent are keeping the deposit themselves under the Mydeposits Insured service, as many Landlords & Agents do, rather than use the custodial service & paying the deposit over to Mydeposits. I’m also sure most Landlords & Agents that hold deposits themselves under this scheme, do not pay the tenant interest (correct me if i’m wrong).

A Reposit insurance backed service is ‘optional’ for Landlords to offer, and ‘optional’ for tenants to take if the Landlord has offered it. This involves the tenant paying a 1 week reposit insurance fee, and then Reposit insuring any damage, as the Landlord will not hold a deposit to claim from.

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I think all of the Deposit Schemes are simpy just another way for companies to make money. I cant follow all of what you are saying as it is lengthy however I have had to make claim on my desposits and it was a horrible process, time wasting, overly arduous. However as OpenRent is now the Agent I put forward my case which was clear cut and I got my share of the deposit back in days so I am very happy with this new option. Much rather this than go through what I went through again. And I disagree OpenRent are targetting low quality tenants I have credit ref checks and tenants with guarantors with OpenRent. Also their customer service is very good.

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I stand corrected. Yes I have confused the Mydeposits Insured scheme, and the Reposit Deposit Replacement service. It just goes to show how much research one needs to put in order to understand the nuances between the schemes.

My apologies to all over the incorrect/misleading information. What I do not understand is why DPS return interest earned on the deposit to the tenants and others not?

I think there is a need for a full review of the deposit process to reduce it to ONLY one common legislated process, that is simple to understand and administer, protecting equally the rights of the tenant and the landlord. I also feel that landlords (and I am a landlord) should not be allowed to keep the deposit in their own account(s). The deposit should be held in a custodial account of the deposit protection service only. If DPS can return the deposit interest to the tenant all others should be obliged to do so. I stand with the tenant on this issue.

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