How could renters' pet insurance work under the Tenant Fees Act?
Steve Harriott, CEO at the Tenancy Deposit Scheme, talks through the challenges the government faces in encouraging more pets in lets.
There are often horror stories about allowing pets in rental homes, yet it's difficult to provide hard data on the reality. Some damage to fixtures and fittings may be caused by pets, but we don't see a lot of deposit disputes at the Tenancy Deposit Scheme from pets specifically.
However, any damage caused by pets will not automatically be covered under the deposit, capped at five weeks rent under the Tenant Fees Act 2019 - which I believe to have been an unintended consequence of the changes made.
The new permitted payment
Three years ago, before the Tenant Fees Act 2019, landlords would take a pet deposit if they decided to accept a tenant with a pet - effectively an add-on to the security deposit. Since then, landlords haven't had the scope to include this extra payment, to compensate for any pet-related damage.
Proposals in the A Fairer Private Rented Sector white paper are set to correct this and introduce pet insurance as a new permitted payment.
It makes sense to encourage landlords to take pets given that there are so many tenants with pets in the private rented sector. During Covid-19, the level of pet ownership in the UK increased significantly, with research showing that 52% of UK adults now own a pet. It also makes sense to help landlords manage the consequences of that.
Cover and liability concerns
So, what concerns do I have about these proposals? First, that this new permitted payment fails to recognise that most pet insurance products currently exclude damage to landlords' fixtures and fittings, because it's difficult for an owner to control what a pet does, 24 hours a day.
Most pet policies are, instead, designed to deal with the pet falling ill. The area of liability for landlords is something most of these policies exclude. The challenge for the government, if they want to take this forward, is working with the insurance industry to see if there's a sensible pet insurance policy that could be developed.
My other concern is that most of these pet policies would insure the tenant for the cost of any damage that they incur to the landlord's fixture fittings, rather than the landlord, delaying any payment to the landlord.
Unless there's a model that sets the landlord as the pet insurance product beneficiary, that's another barrier to making this work.
A recommendation to the government
My recommendation to the government is to consider changing the Tenant Fees Act to allow an additional pet deposit. It was a system that worked well before and I believe it's a more workable solution than the one that's currently being proposed.
The deposit is there to manage any damage caused by the tenant and also their pets - but if there's quite a lot of damage, the current five-week deposit may not cover it all. Upping the amount allowed for tenants with pets would help balance this inconsistency.
The topic generates a lot of interest from landlords, tenants, and pet lovers. I really do hope that as the white paper is discussed and as the bill comes out, there's room for people like us - agents, landlords, tenant groups, and other industry representatives - to get together and come up with a workable solution.