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  • Deposit Protection

    Zero Deposit Schemes

    Hi everyone,

    I have simple question but I am sure the answer would be complicated .

    Is zero deposit schemes any good or better than the standard deposit protection for landlord ?

    Would you take it ?  and if so which company would you go with  please .

    Many thanks guys Smile

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    I believe https://www.zerodeposit.com/ are one of the market leaders and if my memory serves me right I think Vanessa mentioned they maybe becoming a PT partner.

    There was a recent discussion on one that had high monthly fees https://www.propertytribes.com/agent-tryi...38918.html

    Personally, I'm not sold on these type of schemes yet, I prefer to hold the deposits myself through MyDeposits Insurance Scheme for my businesses.

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    In my opinion, ZD is no better for the landlord (although arguably it will be better from 1st June as you will get 6 weeks deposit protection rather than 5 weeks). Whether you get to keep any money to cover damages is decided by the TDS. Any tenant choosing to use zero deposit is a higher risk - why don't they have sufficient savings to cover a month's rent? What is going to happen if they have an unexpected expense during the lifetime of the tenancy?

    I wouldn't be keen as a tenant either, as you have to pay one weeks rent to ZD which is not returned. Then there is an annual fee - why is this needed? I would have thought ZD just needs to be told when the tenancy ends and the fee should be included in the initial cost.

    Just as an aside, from 1st June, you can offer a zero deposit scheme as an alternative to a proper deposit but you can not require a tenant to use it.

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    Here's a sneaky peak of our interview with Jon Notley, CEO of Zero Deposit, who are officially launching on Property Tribes on Monday.  It deals with all the landlord objections like the ones raised above.

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    I've watched the video and I'm struggling to see the benefits.

    It's creating an unnecessary middleman imho into the equation.

    We all know that insurance policies for certain aspects of life are a necessary evil like LL insurance, car insurance etc.

    For MY tenancies, I don't think there's any benefit to either myself or my tenant with ZC.

    Close to £1k is a lot of money for them to pay which they will kiss goodbye to (+£26 per annum) to sign up with Zero Deposit (err, not quite Zero is it?!)

    Yes they have to find more money up front with the 1 month I currently charge, but make no damage (seldom) and pay the rent (which they always do) and they will NOT be better off with your scheme as they will ALWAYS get their money back, minus an average £50 off. I can't see any benefit to myself either with my tenants.

    The amount of that deposit focuses their minds, so that when they come to the end of the tenancy, they know that not paying the last months rent is not going to be an option, nor is trashing the place.

    The ZC deposit is long gone, so who cares if things get trashed as the tenant could sign up with another property and another 1 weeks ZC rent and can carry on to the next - not exactly going to be turned away from creating another insurance policy by ZC are they? I can't speak for other LL's with their choice of tenants but this is my reality. Claiming via TDS never gets the right result for the LL, as per the MANY posts there have been about it on PT over the years. 'Right it off' is the standard practice for smaller figures as it is a waste of time/effort.

    In my situation it is creating a problem which doesn't need to exist and hasn't for the last 10 years.

    There will be a group of tenants that as they know that money is gone to ZC won't care at the end of the tenancy, but that is not my experience and I can't see it being so. For those LL that operate with LA's then if they choose this option that's up to them, but I saw in the video something about HAVING to offer this ZC option? No thanks! I've never had to contact TDS and hopefully I never have to because of the systems I've put in place.

    So thanks, but no thanks from me.

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    something about HAVING to offer this ZC option

    He said something like 'must offer this as an option' which gave a false impression. With the TFB you can not only offer ZD as that will require the tenant to enter into a contract. If you ask for a deposit then you can also ZD as an option as you are not requiring the tenant to enter into a contract. The ZD can not be the only option.

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    Adam,

    You clearly have a good process in place which works well for you and your tenants at the moment. I hope you don't mind me outlining some of the benefits:

    According to TDS data, the average disputed amount with a deposit £601, so when things do go wrong, what protection do landlords really have, particularly if the last month's rent has been skipped.

    Many of the landlords we speak to have moved to larger deposits having experienced tenants frequently canceling the last month's payment and leaving them exposed. So having a Guarantee in place that will continue to give 6 weeks protection and stops tenants from rent skipping is just one of the benefits to a landlord.

    One of the other appeals to landlords is that tenants who buy a Zero Deposit Guarantee, still remain fully liable and our need to recover all monies paid to landlords changes the tenant's mindset for the better.

    For example, at the moment with a cash deposit, an absconding tenant has little or no comeback and can quite easily move on to rent another property without any long term damage to their credit record.

    With Zero Deposit, whilst misbehaving tenants will be treated fairly in line with the FCA regulations, we will go to the effort to pursue them for their liabilities to the point that if they don't co-operate it could end with them receiving a CCJ and limiting their ability to rent in the future - misbehaving tenants certainly wouldn’t qualify for another Zero Deposit.

    Whilst Zero Deposit isn’t right for every tenant, the thing that is clear is that with rising deposits, affordability is a growing challenge to tenants, meaning that by not offering a Zero Deposit option, landlords are restricting potential renters to people who have hundreds or in some areas thousands of pounds in the bank, or risking renters getting into a huge amounts of debt just to rent with you - not the ideal start to your tenancy.

    So I’d summarise the main benefits as:

    - Increased appeal to renters by giving them the option to not have to use their savings in other ways or to not go into debt at the start of the tenancy


    - A Guarantee that provides you with the same protection as a cash deposit
- 6 weeks deposit protection post-June 1st fees ban

    
- Faster dispute resolution in the cases where things do go wrong


    - Reduced voids where tenants are waiting for payday to move in


    - Save admin time and money registering a cash deposit and remove any risk of falling foul of the legislation


    Ben (Sales Director at Zero Deposit)

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    Interesting thread. Lots of useful information. I can kind of see both sides of the argument. I guess it depends on each individual landlords and or tenants circumstances really. I can certainly see the positives. It could be a really useful product for both tennants and landlords.

    I will certainly be keeping an eye on it.

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    Major agent taken to task over ‘no deposit’ scheme that is not an insurance policy

    This is Money, part of the Daily Mail, has criticised Leaders Romans Group for the ‘no deposit option’ scheme it introduced last year, after a single mother was left with a £1,318 bill at the end of her tenancy.

    https://www.propertyindustryeye.com/majo...ce-policy/


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