Deposits can be the blight of tenants’ lives having to find the equivalent of a month’s or six weeks’ rent as a deposit. Tenants find that less scrupulous landlords take advantage of holding a deposit to fund excessive costs, and many tenants don’t know how to or don’t bother to fight, even though this could mean that the deposit that is returned is reduced.
Residentsline have launched a new product line, Deposit & Rent, which has found a solution where you can rent properties without having to put down a deposit at all, Belinda Thorpe explains.
According to the Deposit Protection Service, the average deposit in England and Wales stands at £950, though London renters typically have to put down around £1,800. The most galling thing for many tenants is that when they move, they have to raise a deposit for their new property before they get the previous one back. According to government rules, deposits should be returned within 10 days of the end of a tenancy, but when disputes take place it can often take much longer
So Deposit & Rent has designed a solution to offer deposit-free renting. So how does it work and what’s the catch?
This is how it works – instead of the tenant putting down the equivalent of several weeks’ rent, an insurance policy covers this instead. It helps tenants with cash flow while landlords are still covered for the full deposit. However, tenants still have to pay-up for damage or unpaid rent at the end of the tenancy. Insurers use a little-known clause called “subrogation” which allows them to pursue a third party (the tenant) to recover any claim.
“One in three tenants borrow money to pay rent” says Shelter.
From a landlord’s perspective, paying deposits limits potential tenants to those who have thousands of pounds to hand. From a tenants point of view it means that they have an automatic cash-flow benefit or can move to a new property without having to save for a second deposit or borrow to facilitate their move, which often can be unaffordable.
The policy, issued to the landlord, indemnifies the risk of tenant damage or unpaid rent. The policy is only available for tenants that have passed referencing checks. Crucially, it’s paid for by the letting agent or landlord, not the renter, although the cost of the policy can be reclaimed from the tenant. At the end of a tenancy, disputes are initially resolved directly with the tenant. If an agreement can’t be reached, the landlord or agent can make a claim on the insurance, with the tenant liable for the cost of a successful claim.
Deposit & Rent believe that the deposit replacement product which only costs £75 per annum will change the nature of renting in the UK, however getting landlords to appreciate the benefits may take time. It therefore needs the tenants to help make this change.
In 2017 Get Living London paid back 3 million in deposits to their tenants.
“We had a great response from our existing residents. For most it had been money that was locked up and a cause of much frustration. Whether saved or spent, it’s great to know that £3 million is back in our residents’ pockets. We hope our experience will inspire others to follow, and one day deposit-free renting will be the norm.”
Now new renters who pass reference checks, or have a guarantor, will not have to pay a deposit with Get Living London.
A leading private landlord scrapped rental deposits and has even returned money to its 3,000 existing tenants.
Does holding a deposit really make the tenant a safer bet?
We think the tide in rental properties is about to change.
