To say the last few years have been a hard slog for the UK lettings market is something of an understatement. Stamp duty rises and a slew of new laws have combined to make renting out a property even more of a challenge.
One recent development has, however, provided some comfort for hard-pushed professional landlords and letting agents. Schemes, where a traditional cash deposit is substituted by a deposit replacement product (known as ‘deposit-free’ renting), are breathing new life into the lettings market.
So how does the no deposit rent option actually work? Here we show how deposit-free renting can work for you. There are a number of no deposit schemes available in the UK: in this blog, we have chosen to use the example of Zero Deposit™, a popular scheme backed by the FCA.
To purchase the Zero Deposit™ Guarantee, the tenant pays a non-returnable fee based on one week’s rent. There is no cost to the landlord or agent.
Tenants purchase the guarantee using a simple, online form after the usual credit checks and referencing have been carried out. The documentation is then emailed to all parties, cutting down on admin time and paperwork.
Following the one-off fee, tenants are charged an annual admin fee of £26 if they remain in the property.
The guarantee can also be purchased for multiple tenants. Applicants sign up together and share the cost of fees, becoming jointly and severally liable for any unpaid rent or damage. When one tenant leaves and another takes their place, the new tenant pays a £40 admin fee, and the HMO documentation is updated.
What happens when a tenancy ends?
The landlord that goes with Zero Deposit’s no deposit rent option is protected against unpaid rent, loss and damage to the value of six weeks’ rent (this protection is exclusive to the Zero Deposit Guarantee). It is the tenant’s responsibility to pay the landlord directly for any financial losses incurred.
If the landlord and tenant can’t agree, The Dispute Service (TDS), a government-approved dispute resolution specialist, is brought in. If the dispute is settled in the landlord’s favour, the landlord will receive payment in just two business days after the decision has been made.
From the tenant’s viewpoint, deposit free renting means they can move in faster. It also means they can spend their hard-earned cash deposit on other things.
With fewer void periods, less admin and happier tenants, no deposit rental schemes offer a ray of sunlight after a long ‘winter of discontent’ for landlords and letting agents.