Deposit insurance claim

[Milzee]

Hi all, first time poster here. I recently let a property and instead of placing a deposit the tenants took out deposit insurance. This is the first time I've done this. Apparently it's a new thing and becoming quite popular. I think the policy was sold to the tenants by the letting agent and the letting agent assured me the insurance was as good as a deposit. Last May the tenancy ended and I had to make a claim on the deposit for some repairs. The tenants have disputed the claim and the process is going nowhere. I am dealing with the agent and, as far as I can tell, they have just spent the last 8 months trying to convince the tenants to pay up and haven't involved the insurance company at all yet.



It seems to me the tenants have no incentive to come to a settlement because they have no deposit at risk and have presumably already paid the insurance premium. I have asked the agency to refer this to the insurance company several times but they seem reluctant to do this and keep negotiating with the tenants who, in turn, keep delaying. The whole process is going round in circles. I have received no documentation relating to this insurance so I don't even know the name of the insurance company to see if I can complain to them. There is a clause in the tenancy agreement in lieu of the deposit clause saying insurance is required and I should receive a written copy. I have requested that.



It looks like I have been sold a pup and the insurance is not worth the paper it's written on - assuming it even exists. Needless to say I have not accepted deposit insurance on any of my properties since. Does anyone have any suggestions on how I can formally move this forward? Should I be taking action against the tenants, the agent or the insurance company?

[jpkeates]

If you've suffered a loss as a result of the tenancy beyond fair wear and tear, you can seek to recover this from the tenants ignoring the deposit process or the insurance.
It's probably up to the tenants to claim from the insurance that they took out.

So I'd write to the tenants (or tell your agent to) demanding the money (and detailing the basis for the claim) stating that your next action will be to commence legal proceedings to recover your loss.

[Milzee]

Thanks for the feedback. Yes this is repairs beyond wear and tear. I've already given them a detailed breakdown of costs itemised as they were listed in the check out report. I thought I could go straight to the insurance company and make a claim. Looks like I am going have to go down the route of taking action against the tenants. This will be a near impossibility as they have moved out and I don't think they are even living together anymore.

[jpkeates]

If you tell your agent to make a claim on the insurance, they'll either have to do it or reveal that they sold you a pup.
Or tell them to send the letter before action.

[Milzee]

So who claims on the insurance, the tenant, the landlord or the agent?

[Hollywood]

Presumably the tenant claims, as they supposedly paid the premium.

[amy131]

I saw one of these deposit replacement schemes advertised on Facebook recently, had not heard of them before, the below page gives an overview. It states that the provider pays the landlord and then the provider claims back from tenants. Note the mention of commission paid to agents.
https://blog.openrent.co.uk/rent-wit...ent-insurance/

[Milzee]

Yes thats what I thought but I don't even have the name of the insurance company let alone a policy number. I've asked the agent to provide the details.

[amy131]

Perhaps look at the agent's website and listings and you may see them promoting the scheme.

[jpucng62]

I think your agent may not have paid for the insurance - so I would suggest you ask for proof that they did or claim against them.

[Milzee]

So I've just found it's not an actual insurance scheme. It's a no deposit scheme underwritten by the agency themselves based on the tenant's credit rating and, subject to the usual arbitration process if the tenant disputes any claim. That's not how it was explained to me originally but as always the devil is in the detail. The agency says they will take it to arbitration. I'm not sure why it's taken them 7 months to do this. Do I have any grounds for action against them due to the delay?

"How will this package for tenants benefit me as a landlord?
• Without having to collect a deposit from your tenant upfront
we can move tenants into your property quicker, minimising
void periods and tenants may pay higher rent
• We can attract a wider range of prospective tenants as more
people will be able to afford to rent if they don’t have to find
a deposit and more will be attracted to renting through us to
access this unique no deposit option
• We will still carry out all necessary checks on your tenant,
including referencing, right to rent and guarantor referencing
• The scheme offers your tenant the opportunity to build up a
positive credit score, taking into account the rent paid – this
reduces the risk of rental arrears"

"Who is backing the no deposit option, how can I be sure it will
be available throughout the tenancy agreed?
The no deposit option is backed by the Leaders Romans Group
(LRG), one of the UK’s largest residential property services
groups, with over 150 branches, 50,000 rental properties under
management and annual revenues in excess of £100 million. The
group is backed by leading private equity firm Bowmark Capital.
The LRG’s services include residential sales, lettings, investment
advice, auctions, new homes, surveying, land and development,
planning and mortgages. For more information, please visit
leaders.co.uk"

[jpkeates]

Who is going to arbitrate?

A conventional deposit scheme is an independent 3rd party who are (essentially) licensed by the state to perform a function and, therefore, have an interest in being able to demonstrate that they are performing their function adequately.

A property management company who are selling what sounds like a self funded insurance product aren't going to be able to arbitrate independently as they're an involved party - if they agree to your claim, they're going to have to pay out, if they don't, they're not.

They'd need to use an independent 3rd party to arbitrate the claim (someone totally not connected to them).

Their web site says it's an independent 3rd party - so it'll be interesting to know who it is.

[Milzee]

Yes it's an independent arbitrator. Presumably the same one they would use for a dispute on conventional deposit. According to the blurb:

"The tenant is still able to challenge any dilapidations through an
independent third party arbitrator and we will consider the view of
the arbitrator final."

[jpkeates]

The arbitrator for a dispute on a conventional deposit would normally be the company protecting the deposit.

I'd be very interested in who else provides a service like that - demand must be tiny.
And I don't see any benefit to the tenant in agreeing to arbitration.

[theartfullodger]

Sue tenant and agent for your loss?? If either of them wishes to make an insurance claim, that's up to them.

I've always felt these deposit schemes/scams are going to come unstuck.