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No Deposit Renting

No Deposit Renting

In this month’s five-minute blog, we cover the increasing popularity of No Deposit Schemes and give you an overview of what they provide, allowing you to see how they can benefit your agency, the landlord and the tenant.

What is a No Deposit Scheme?

No deposit products, such as our Smart Deposit are alternatives to the Traditional Deposit Scheme.

Rather than a tenant needing to raise a large, sometimes unattainable sum for a traditional deposit, renters can opt to take the alternative of a No Deposit Scheme. Following this route would mean that the tenant pays a small non-refundable fee towards a warranty/insurance product that in turn provides coverage for the landlord for any dilapidations at the end of the tenancy. It’s important to note that tenants would still be liable for any damages incurred and although this often won’t delay claims, it’s vital they’re made aware of this.

If a dispute is raised, then mediation services are often provided, either directly through the provider or an authorised third party and are usually resolved with little resources needed from the agent.

Companies will differ on the total amount you can claim, with six weeks rental worth being the standard, however, these can go upwards of two months in the case of our Smart Deposit Warranty.

Why are these alternatives becoming increasingly popular?

It’s easy to see why these products appeal to tenants. Last year the TDS reported that the average deposit for a property was £1,110 and even with the deposit cap in June, No Deposits Schemes are attractive to renters from a financial standpoint. These products also decrease the downtime as tenants relocate from one let to another as there is minimal delay due to no deposit to return.

Landlords now more than ever are they open to this as an opportunity. The 5-week deposit cap was a big blow, making them feel progressively vulnerable. No Deposit Schemes typically provide added protection compared to the TDS due to the higher level of cover, alongside increasing demand due to improved tenant interest.

Why are agents choosing to offer No Deposits?

Aside from referral commissions, many agents use these services to lower void periods and to increase the desirability of those harder to rent properties. This, in turn, increases customer satisfaction for both your tenants and landlords, which is not to be overlooked as we go through the tenant fee ban.

Do No Deposit Schemes appeal to undesirable tenants?

It’s no surprise that agents are concerned that a reduced price point may attract a lesser quality tenant. It’s worth noting that when these services are offered by referencing providers, you have the advantage of these products being offered off the back of a successful comprehensive reference, ensuring you have an acceptable tenant. It’s also advisable to find out the claims process for providers and how many cases get escalated to mediation so you can gauge the risk factor.

Additionally, if as a letting agent you make tenants aware that they’re still legally obliged to pay for any damages caused and will be pursued for these monies by the provider of the scheme then this should hopefully deter any “undesirable” tenants from trying their luck.

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