Consider your Deposit Replacement Scheme Options
When operating in any evolving market, it’s important for all parties to carefully identity new opportunities and keep up to date on how certain components within this market are being overhauled and modified. A factor which is certainly the case for landlords in the current buy-to-let climate.
Take deposit replacement schemes for example. Sometimes referred to as zero deposit schemes, these require tenants to pay a non-refundable fee of around one week’s rent instead of the more traditional upfront refundable security deposit (which will be capped at five weeks’ rent under the Tenant Fees Act).
The tenant’s fee is used as an insurance guarantee, which landlords can claim compensation from in the event the tenant is responsible for damage to the property. After compensating the landlord, the deposit replacement scheme will then recover the costs from the tenant directly.
However, research from Your Move suggested that renters are increasingly interested in alternatives to traditional upfront deposits. Half of the 4,000 adults surveyed said they were interested in alternative or insurance-backed schemes, whilst 70 per cent said having the choice to pay an upfront deposit scheme would influence their decision on whether to rent a specific property. This was backed up in a recent trade press article from PayProp which also suggested that alternative schemes are gaining in popularity.
This underlines how important it is for landlords, letting agents and tenants to fully understand how such systems work, before committing to using them. And to carefully consider the options available to them, including the range of different providers and product variations now on the market.