One of the biggest expenses for renters when moving home is getting a new deposit together. It can be a huge sum on top of everything else, and it can effectively stall tenants in a property they are unhappy with for longer than they would like.
The world of deposits is already well regulated, with laws in place which require landlords and letting agents to put the money into a Deposit Protection Scheme in order to protect the tenant. This is an extremely positive thing, but the government is exploring the idea that it is not enough.
Instead of simply securing a deposit, should deposits be reduced altogether?
A report from the Ministry of Housing, Communities and Local Government has concluded that rental deposits have become far larger than they need to be to succeed in their stated purpose of protecting landlords.
According to the report, the average tenancy deposit has risen as high £1,161, an increase of 18.6% over the last five years. When you consider that tenants must pay this before they receive their old deposit back, the challenge facing tenants only heightens.
In the face of this, several alternatives have been suggested. The Zero Deposit scheme, backed by Zoopla, allows tenants to buy an insurance policy for the equivalent of a weeks’ rent which protects landlords to the tune of six weeks’ rent. The product is only available on some properties, and only on Assured Shorthold Tenancies. Not everyone will qualify, but it is an interesting idea.
An alternative service called Flatfair works on a similar principle, but covers the landlord for 12 weeks’ rent, rather than six.
However, there is one obvious downside to alternative schemes like these from the tenants’ point of view. Whereas with a traditional deposit scheme you will get your deposit back in its entirety at some point – assuming all is well with the property after you leave – schemes like Zero Deposit and Flatfair charge a non-refundable fee which the tenant will never see again. The fee is smaller than a traditional deposit, but will tenants take up the schemes if they are permanently losing money?
It is an interesting question, but it is becoming increasingly clear that change is in the future for landlords when it comes to deposits.
Are you a current tenant looking for advice on deposits? Get in touch with our team of experts today.