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  • Deposit Protection

    Smart landlords are using deposit replacement



    Property Tribes recently welcomed Zero Deposit as a commercial partner.

    Deposit replacement means that tenants are able to buy an insurance policy in lieu of a deposit.

    Zero Deposit is the leading scheme and was formed by some industry heavyweights, including Jon Notley, former Commercial Director of Zoopla, who are also backers of the company.

    Deposit replacement has many attractive benefits to landlords, including the following:

    >  As it is not a cash deposit, Zero Deposit does not fall under existing tenancy deposit regulation - so no prescribed information, no protecting the deposit within a certain time-frame.  This reduces the risk for landlords, as they do not become exposed to risk through non-compliance.

    >  Zero Deposit has found that advertisements offering this option attract up to 26% more click-throughs to the listing, giving a greater pool of tenants to choose from.

    >  As tenants only have to find one week's rent for the policy, it makes renting more affordable, and they can move more quickly, even if they have a traditional deposit tied up in their previous rental home.

    >  Zero Deposit has been found to reduce the rate of "rent skipping" at the end of a tenancy, which occurs when tenants do not pay the last month's rent, believing that the deposit will cover it.

    Zero Deposit, 14 months since its launch in February 2018, have reported a record number of agents have joined its partner network, with numbers accelerating as the 1st June 2019 deadline approaches for the introduction of the Tenant Fees Bill.

    The latest signings include an impressive roster of influential regional independent agents, all of whom have a major footprint in their markets, including Dacre, Son & Hartley (Yorkshire), Kings Group (London & Home Counties), Andrew Craig (North East), Keatons (London), Moginie James (South Wales), Michael Poole (Teesside), Paramount (London), Pedder, (South East London) Watsons (Norfolk) and Northfields (West London), among many other new agent launches.

    Following a survey released in March by lettings agency Your Move, it is clear tenants also have an increasing appetite for deposit replacement.

    It says over half of tenants questioned in a very substantial 3,752-person poll would be interested in an alternative approach to traditional tenancy deposits.

    Full/source story

    In this in-depth interview, Zero Deposit CEO Jon Notley why smart landlords are increasingly looking at deposit replacement:


    FIND OUT MORE ABOUT ZERO DEPOSIT

    As mentioned in the video,  Zero Deposit is regulated by the Financial Conduct Authority and is backed by the world’s second largest insurance company Munich Re.

    TDS will be providing dispute resolution services.

    FIND OUT MORE ABOUT ZERO DEPOSIT

    SEE ALSO  -          Zero Deposit Schemes

    UP NEXT -              Zero Deposits and Flatfair

    DON'T MISS -         Deposit replacement is here - Zero Deposit

    NOW WATCH:

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    Sounds great in practice, although interested if this could potentially breach upcoming tenant fee bans as that appears quite comprehensive.   Surely requiring a tenant to pay a fee for insurance could potentially not be allowed.  giving the tenant the option of a traditional deposit or this insurance may get round the new tenant fees ban but im not sure that it would fly.

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    Deposit replacement is fully compliant with the Tenant Fee Ban which is why so many lettings agents and landlords are taking it up.

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    This is a very interesting concept and one I was not aware of despite seeing no deposit rental adverts on rightmove etc -I like It

    my only real reservation I guess is you will attract less solvent tenants if they can only put a weeks rent down to move in it’s less of an upfront commitment from them which gives me less security. Despite the usual referencing and tenant checking you are going to attract less cash rich tenants to this option. Be interesting to see default rates of tenants for this option compared to normal upfront traditional cash deposit option


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    I had the same reservations as you, but they were answered in the first video:

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    I guess the other related thing if I am a tenant putting in 2k to move in vs say 250 quid I am much more motivated to keep the property in good order if I risk losing my 2k rather than 250 quid.... still an interesting concept and I have no doubt one that would lead to more interest and viewings

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    I also asked about that in the video, as that was another of my concerns. Smile

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    Just watched the video. While it does does mention it and having 'skin in the game', it doesn't really address the concern.

    It it is similar to the DSS-style tenant in that the tenant is less likely to look after something that they haven't invested in.

    I'd rather a tenant cause £2k of damage and I keep £1k of THEIR deposit rather than a tenant cause £2k of damage and walk away without a care.

    This may work for some but not for me.

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    Yes I agree with you .

    The worry also is that with no deposits and no fees that tenants will just keep moving around.

    Most tenants don't appreciate whats done for them so even managing your property well doesn't mean they will be staying with you . If they invest less themselves then its just so easy for them . More voids and costs.

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    It’s a different type of skin in the game to a cash deposit.

    With a cash deposit the tenant leaving without paying their last months rent and significant damage, is effectively losing 2 weeks rent (if they’ve given 6 weeks) once the last months rent is covered, which is rarely enough to cover any significant damage. This tenant can then go and rent another property pretty easily with no long term implications. 

    With Zero Deposit, the skin in the game is the potential for it to end in a CCJ in this same situation if they refuse to cooperate. It could genuinely mean they are unable to rent in the future, a far greater implication than the loss of a few hundred pounds.

    This is a part of Zero Deposit that most landlords really like

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    Hmmm I disagree.

    The potential of a CCJ is not really exclusive to Zero deposits though. CCJ can apply to both.

    I also know there are some tenants who tend not to really understand the implications of having a CCJ in their name until they actually have one. So it doesn't act as much of a deterrent as you think. (A bit like a teenager doing some petty crime and getting a criminal record that affects their future job prospects). Whereas the risk of losing money is something everyone can grasp.

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