Zero Deposit scheme

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    Zero Deposit scheme

    Anyone out there, T or LL, ever used this

    https://www.zerodeposit.com

    We have an agent who offers this asking if we want to market our property with this. My initial thought was that it would simply attract people who can't even save enough to let a property... not the kind of financial management we're looking for in prospective tenants. But on the other hand...

    #2
    My letting agent here in Reading seem to be keen on this, but I always tell them I don't want it: Tenant pays 5% extra rent to insurer, then when they leave, insurer uses the cash to sue tenant for repair costs. Like that's ever going to happen!

    Just give the extra 5% rent to the landlord to save up to cover repairs, is surely a better idea?

    Comment


      #3
      My letting agent wants to include a whole bunch of references to his zero deposit scheme into my tenants renewal agreement despite the fact that I've told them that I want nothing to do with it and I object to its inclusion.

      Has anyone else had this experience? What right do they have to do this when it doesn't relate to the actual tenancy?

      Comment


        #4
        Originally posted by Rambler View Post
        Has anyone else had this experience? What right do they have to do this when it doesn't relate to the actual tenancy?
        Give direct explicit instructions to them in writing, if they ignore you, that's them telling you to find another agent.

        Originally posted by JK0 View Post
        Tenant pays 5% extra rent to insurer, then when they leave, insurer uses the cash to sue tenant for repair costs. Like that's ever going to happen!
        The irony is that it does. There was a recent news article about the problems of tenants finding themselves being sued by the "insurer" they spent the tenancy paying a premium to, and having to pay for the damages on top of all the money they paid over the tenancy.

        Would not recommend whether from a landlord or tenant POV.
        I am not a lawyer, nor am I licensed to provide any regulated advice. None of my posts should be treated as legal or financial advice.

        Comment


          #5
          thanks everyone... you've confirmed my feelings on this scheme... or maybe its supporters are late to the party...

          Comment


            #6
            I think there are 2 problems with the zero deposit scheme:

            1. You get a tenant who's finances are close to the bone & may fall into difficulty
            2. It is expensive for tenants - it looks like a good deal, but inevitably when you put a layer of profit into any arrangement the cost goes up. Tenants may not really understand it but it will cost them more in the long run.

            I will avoid at all costs!

            Comment


              #7
              Actually, I think that tenants will like it.
              It means that they pay more over time, but it's not as bad as it sounds.

              One of the schemes I looked at costs £130 per annum (to the tenant) and would replace a deposit on one of my properties of £1200 (or £1000 after June 1).
              That's pretty good, the tenancy would have to last more than 6 years for the fees to equal the deposit amount.

              The obvious downside is that the £1000 is actually the tenant's money and they'd get it back (in theory), while the insurance fees are sunk money.
              In practice, most tenants are genuinely concerned that the landlord will simply rip them off at the end and they'll lose at least some of it.

              It means that the tenant can move between rental properties much more easily because the "old" deposit is invariably still not in the tenant's possession when it's due for the new one.

              The actual downside only manifests itself when it's revealed that the insurance is for the landlord only, and any damage compensated to the landlord will be recovered from the tenant.
              In theory, that only affects poor tenants, and, as the vast majority of tenancy deposits are returned in full, it's probably not a deal breaker.

              The only problem I can see is that from June 1st it's illegal to require the tenant to enter into a contract with someone else as a condition of a tenancy agreement.
              Which kind of screws the business model!
              When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
              Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

              Comment


                #8
                Originally posted by jpkeates View Post
                The only problem I can see is that from June 1st it's illegal to require the tenant to enter into a contract with someone else as a condition of a tenancy agreement.
                Which kind of screws the business model!
                I wondered about that too JPK. I think they may be relying on it being voluntary, as of course there is always the option of paying a deposit instead.

                Comment


                  #9
                  Originally posted by JK0 View Post
                  I wondered about that too JPK. I think they may be relying on it being voluntary, as of course there is always the option of paying a deposit instead.
                  I've been looking at this since I posted it, and, as far as I can work out, a landlord can include a requirement for a tenancy deposit, because that's not a prohibited payment (as it happens it's not actually a payment at all, but that's not really helpful, either).

                  But "a landlord must not require a relevant person to enter into a contract with a third party in connection with a tenancy of housing in England if that contract is—
                  (a)a contract for the provision of a service, or
                  (b)a contract of insurance."
                  Which is a problem.

                  However, "For the purposes of this section, a landlord does not require a relevant person to make a payment, enter into a contract or make a loan if the landlord gives the person the option of doing any of those things as an alternative to complying with another requirement imposed by the landlord or a letting agent."

                  So I think that the intention is that you make a deposit a requirement, but allow the tenant to take an insurance product as an alternative.
                  Which would be allowed.
                  But you can't make having the insurance policy a requirement in itself.

                  But if the tenant stops paying the insurance and declines to cough up a deposit, I can't see how you'd do anything about it.

                  They'd be in breach of a contract term, but you'd have no luck with s8 based on that.
                  You don't actually have any loss (so no compensation) because the only thing you don't have is possession of the tenant's money as security (which hasn't any real value until the end of the lease).

                  So your clever tenant pays a year's insurance to get into the property and then stops.
                  When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                  Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                  Comment


                    #10
                    And my confidence was slightly dented when I visited the web site of one of the schemes, Dlighted, to find that they offer landlord peace of mind if "they can't find tennants".

                    I apologise if they genuinely source alternate lagers for landlords, that would be some service.


                    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                    Comment

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