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  • Deposit Protection

    Deposit replacement schemes - any feedback?

    Hi

    I heard about  "0"  deposit schemes  and will appreciate any feedback from LLs and who are the providers ?

    Thanks

    MB.
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    Have a look here:

    Deposit replacement - analysis and views

    And this is our new video on the topic of PT partner, Zero Deposit (other schemes are available):

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    I put this comment on another thread earlier

    I’ve just read some of the FAQs on the Zero Deposit website and my understanding of the scheme is - 

    If deposit at five weeks rent is a £1,000 then the initial premium is £200 and there is also a £26 annual renewal fee.  

    At the end of the tenancy the outgoing tenant is expected to pay for any damage and if they do not Zero Deposit will pay and then pursue the former tenant for the money.

    I suspect not all tenants will be willing to pay the renewal premium and also at the end of the tenancy there will be disputes as to why the tenant has to pay for any damage when they have paid for what they perceive to be a deposit insurance policy.

    Sorry but I’m not convinced that the scheme is a good idea or value for money.

    Others will think zero deposit schemes are a good idea.

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    The principle advantage of Zero Deposit schemes is that legally they are not deposits, they are insurance products. This has the distinct advantage of avoiding the deposit protection legislation which has become a complex and litigious  form of entrapment for private housing providers,  often rendering sec 21 no more certain than a game of Russian Roulette to steer through the court system.

    Zero Deposits is underpinned by the TDS scheme assessors so unlikely to be perceived as objective by many. 
    I will be using them to avoid legislative entrapment, not because I think they will provide a objective service overall.
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    This was the other idea touted 5 years ago when people were getting caught out not protecting their deposits and more recently invalidating s21 notices (soon to be axed). Where tenant in essence takes out an insurance to protect you.

    It's a good idea especially for those who cannot afford 5 weeks rent. It's one less barrier to entry. But it's still insurance, and you know what they are like when paying out on anything.

    I was also surprised to hear that deposit disputes from existing DPS/TDS now fallen to just 2%. So there has been some big changes going on in the market despite those nightmare stories that pop up from time to time in the press.

    As a landlord who has never charged deposit, offered rental below market rate for long-term tenancies there is nothing stopping LL from adding 100gbp onto your rental and ringfencing it to form a psuedo- deposit for when you need to repair issues at the end of the tenancy.

    Assuming that overall the tenancy ran smoothly this allows you to focus on customer care and building relationships which in the long run gets you a long-term tenant. Of course if they stop paying rent then that's a different scenario altogether. But then most tenants in the past treated their deposit as rental for their last month before running off.

    So my view is it's another option on the table for those who want less red tape with existing schemes.

     - but you accept that there is still a 3rd party who will be involved in your contract.

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    there is nothing stopping LL from adding 100gbp onto your rental and ringfencing it to form a psuedo- deposit for when you need to repair issues at the end of the tenancy.

    If you are taking money that is specified in an agreement with the tenant to be returned to them at the end of the tenancy then it is a deposit and all the relevant legislation applies. Have a look at the Lifestyle Club Limited judgement where they just got fined over £42000 for trying to rename deposit / rent as joining fee / monthly contribution fee to avoid the deposit and AST laws.

    If it isn't in an agreement with the tenant, how do they know they will get back this extra rent they have paid you.

    If you mean £100 on the first month's rent, then the Tenants Fee Bill stops you.


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    Let's say you were thinking of renting out 1 bed flat for 750.00 per month. ZD would have taken 1 weeks rent. Your TA will will simply say 'XY flat @ monthly rental 780. No deposit taken. That's it. No other issue.

    As far as you're concerned if / when you need to clean up at the end of the tenancy, the money was paid over the course of the tenancy as rent. You don't need to chase them up for it. You can ask them to tidy it up a little nearing the end of your tenancy when either party has given notice, but if you need to paint/ decorate it then you already have cash.

    There is no issue. Unless they do some freaky damage in which case you can consider contents insurance.

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    Personally i want the tenant to have some sort of “ investment “ in their tenancy, i’d not trust all to renew any annual premium and you’d have little leverage to ensure they do so. I’d also expect councils to be looking at such products as a cheaper way of helping people into a tenancy with the bonus of not having to deal with anything later.
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    I've always wondered how a tenant can take out a policy that is to ensure their LL gets payment incase there is a problem? If the LL was taking it out for their protection then I could understand, but it all seems a bit mixed up?

    And I wonder what the drop-out rate will be when it's time for the annual review?

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