A growing number of companies and letting agents are offering deposit-free options without making it clear they could cost renters more over time, according to the BBC. 

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 upfront. 

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 a BBC investigation suggests that they may not be a good idea, with some agents potentially misselling deposit alternative schemes.

The property ombudsman, Katrine Sporle, says a number of renters have had bad experiences, with some people told they had to use a deposit-free scheme to rent with an agency.

Government guidance says a landlord or agent cannot insist a tenant uses an alternative to a traditional deposit, but it can be offered as an option.

Despite growing enthusiasm for deposit-free renting, it is important that renters and landlords understand how these insurance-based alternatives to traditional tenant deposits work before committing to using them, according to Sporle. 

David Cox, chief executive of ARLA Propertymark, says he welcomes anything which helps renters struggling to pay a new deposit before they get their previous one back.

But he accepts that it is is important tenants understand fees for deposit-free schemes are generally non-refundable.