What is Deposit-Free Renting?

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What is Deposit-Free Renting

Deposit free rental is growing in popularity and may be shaping the way we approach property rentals.

Zero deposit is an alternative to the standard, hefty security deposit, but acts largely in the same way. A zero deposit is a guarantee to a landlord which usually makes up just one weeks rent before the tenancy starts.

If a tenant is responsible for any loss or damage thereafter to the property, a regulated body, such as the Tenancy Deposit Scheme, review the case accordingly. This covers the Landlord for up to 12 weeks rent rather than the industry standard of six.

This provides adequate security to both the tenant and the landlord, and also makes renting an investment property far more accessible for most tenants, with a reduced deposit required to be put down.

This would also appear to aid the economy. The Department of Communities and Local Government highlight that the total value of cash tied in deposits stands at a colossal £4.1bn at the start of 2017/18, with this figure rising. This is a huge sum that can be reinvested to bolster the economy.

CEO of Zero Deposit, Jon Notley, says “we knew from our research that Zero Deposit would be popular, but it is especially pleasing to see all types of towns and cities embracing the product, from rural towns like Ripley through to coastal towns, suburbs and the cities”.  Zero Deposit now has over 850 offices using their service in major cities including London, Manchester and Leeds.

This is particularly relevant with the Tenant Fees Bill currently being reviewed by the Government, with the major impact being the abolishment of tenant fees. Other major amendments include a potential reduction from six to five weeks security deposit, and other amendments regarding late payment and the retainment of security deposits. It may be logical then to opt for a zero-deposit scheme.

There is a case for being cautious, however. Some take the view that if a tenant is unable to pay a security deposit, it is unlikely to instil confidence in a landlord that the tenant will reliably pay rent monthly.

The Deposit Protection Service (DPS) add that a cash deposit still provides the greatest security for both parties. A spokesperson for the DPS says “we are not convinced that the alternative schemes currently on the market will help reduce financial pressures on renters or offer greater security to landlords. Whilst these schemes may seem attractive to tenants from an initial cost perspective, tenants may find that they actually incur higher costs by the end of a tenancy.” 

Some even claim that deposit-free renting is being used by agents to compensate for the lack of tenant fees being abolished this year.

With drastically opposing views on the subject, it is yet to be seen whether deposit-free renting will become a popular option in the rental industry. It is certainly an enticing option in the short term for tenants though, to find a rental property with less initial financial drain.

Editorial Team
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