When renting a property out, landlords recognise that it is important to take a deposit from the tenant and place it in a government-backed tenancy deposit scheme as protection to ensure that any potential damage or unpaid rent at the end of the tenancy is covered.
However, raising enough money for a tenancy deposit can be a real challenge for some renters, which partly explains why there is growing appetite for deposit-free renting.
Nil deposit schemes, such as insurance-based alternatives, are viewed by some people as a weclome alternative to a traditional deposit as they provide protection for landlords at the same time as helping tenants who do not have big reserves in place to pay a month’s rent and a few weeks deposit up front.
Recent research from Your Move suggests that renters are increasingly interested in alternatives to traditional upfront deposits.
Renters in England and Wales shell out £1,110 on average for a deposit, according to the Tenancy Deposit Scheme, and often have to pay twice over due to delays getting their previous deposit back.
Research by consumer group Which? found that 43% of tenants that were planning to move to a new rental property had to use a credit card, loan, overdraft, or borrow cash from friends and family to pay for a deposit on their new home.
The study also found that 16% of tenants who had moved out of a rental property in the past two years had to wait more than four weeks to get their deposit back, leaving a third to pay a new deposit before they had received their previous one back.
Deposit-free renting provider Flatfair is among a host of companies calling on the government to reform the rental deposit system.
Franz Doerr, co-founder and CEO of flatfair, said: “The growing demand for deposit replacement services in the UK shows that a more equitable solution that affords landlords enhanced protection, while saving tenants money, is possible.
“Instead of diverting resources into solutions that perpetuate the existing tenancy deposit model, government should promote the adoption of alternative tenancy deposit initiatives by incentivizing landlords who opt for alternative deposit solutions introducing clearing platforms for financial transactions.”