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Concerns raised over deposit-free renting being mis-sold to tenants

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.

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    Good to see recognition that this costs all tenants real money whereas standard deposits being withheld either in part or in full only cost tenants who have not returned the property in an acceptable condition.

    What is not covered is the doubt placed in Landlords' minds by tenants who are not confident that they will take proper care of the property ( and thus have their full deposit returned) or who cannot afford the deposit and thus are more likely to incur rent arrears.

    In my view, no deposit schemes only benefit the organisations making money out of them at the expense of poorly advised tenants.


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