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.
But 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.
But despite growing enthusiasm for deposit-free renting, it is important that landlords understand how these insurance-based alternative to traditional tenant deposits work before committing to using them.
Nil deposit schemes are a helpful 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.
Some 50% of almost 4,000 adults surveyed said they were interested in alternative or insurance-backed schemes, while 70% said having the choice to pay an upfront deposit scheme would influence their decision on whether to rent a specific property.
Neil Cobbold, chief operating officer of PayProp, the lettings payment provider, commented: “It’s clear that tenants' awareness of deposit alternatives is growing and many are interested in how the system could work for them and they could soon become a key piece of criteria for some movers.
“This means now is a good time for letting agents and landlords to carefully consider the options available to them, including the range of different providers and product variations now on the market.”
With a growing number of agents signing up nil-deposit schemes, they are rapidly becoming more commonplace, which is ultimately welcome news for many renters given that research shows that they unequivocally want choices. But as a landlord, do you think the deposit-free rental model a good idea?