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There is a new buzzword in the renting sector which threatens to add more confusion to a market already afflicted with grey areas. The term ‘zero deposits’ is being used to describe a number of financing options for renters to consider when moving homes.
And while providing renters with more choice is certainly a step in the right direction for the sector, many of these schemes come with a small print. Renters need to stay savvy to work out if they’re actually choosing a better alternative to the standard deposit scheme.
So, what’s the difference?
Currently the majority of new renters are expected to provide a deposit equal to six weeks’ rent which is held by the Tenancy Deposit Scheme (TDS), an independent, government-approved scheme.
From 1 June, the Tenants Fees Act will see deposits capped at five weeks rent for properties where the annual rent is less than £50,000. For those renting more expensive homes (where the annual rent is equal to or greater than £50,000), up to six weeks deposit will still be allowed.
For many residents this is still a significant sum and can be financially challenging when moving in between properties and waiting for a previous deposit to be returned.
This has led to several companies setting up tenancy insurance schemes, which ask residents to instead pay a non-refundable fee, usually to the value of one week’s rent.
So, the reason these companies can use the term ‘zero’ or ‘no’ deposit, is because it’s not a deposit. You won’t get it back.
A smaller up-front insurance fee may work better for some in the short-term, but it’s worth noting that when you move-out you’ll still be liable to pay for any unpaid rent or damages, as would be the case if you’d paid a deposit upfront.
With tenancy insurance schemes, the best-case scenario is that the resident says goodbye to one week’s rent. Whereas the best-case scenario with the government’s TDS is you get all your six (soon-to-be-five) weeks rent back at the end of the tenancy.
Is there a better option?
There are disruptors in the rental market trying to cut through the smoke and mirrors and offer a better, simpler way of renting.
At Get Living we can confidently say we offer a true no deposit solution – there’s no catch, really.
Two years ago, we made the bold decision to scrap security deposits all together at the same time as returning deposits to those already living with us. In doing so we’ve put £3 million back into renters’ pockets.
We did this because it’s the right thing to do and we wanted to strengthen the trust between us and our residents. From managing 1,500 homes in East Village we knew that of the six weeks security deposit we initially took, what we held back only amounted to a few days. We knew we could trust people to look after their homes and to continue to ask for a deposit seemed unnecessary, admin-heavy and of no benefit to our residents.
So now, for everyone who passes referencing, or has a guarantor, you won’t part with a penny when you sign up to rent a home with us. We’ve always tried to keep things simple – from the beginning we’ve never charged fees, so the prices you see on our website are what you pay.
By taking the hassle out of renting and making things more transparent its meant that residents who choose to live with us can get on with the stuff that matters and enjoy a more positive living experience.
Our hope is that true ‘zero deposit’ renting will one day become the norm.