Why some landlords are doing away with deposits

Next Friday, a new law will make it compulsory for landlords to use some kind of Tenancy Deposit Protection (TDP). The aim is to prevent them pocketing the money given in advance by tenants to cover accidental damage. But it may have an unexpected effect: landlords may start doing away with deposits all together.

When TDP comes into force, all deposits will either be held by a neutral third party or covered by an official insurance scheme. The third-party scheme, run by Computershare, is free - the company makes its money through interest on the deposits. The insurance-based schemes, backed by the National Landlords Association and the Association of Residential Letting Agents, will pay out to tenants if the landlord unreasonably refuses to return the deposit, and will be used by big landlords and professional letting agents. Disputes will be settled by arbitrators rather than the courts, to keep legal costs down.

Landlords will be obliged to produce evidence that the deposit is protected, or face a fine equal to three times the value of the deposit and lose their rights to evict the tenant.

Critics of TDP say the paperwork involved is complex, and disputes may take weeks to resolve before money is released for repairs. So it is little wonder that alternatives are springing up to abolish the need for deposits altogether.

New "no deposit" schemes are being set up by companies that vet tenants for landlords by taking up references, running credit checks and looking through court records for previous evictions. They are offering to reimburse landlords if tenants they have approved fail to pay the rent or leave the place dirty or damaged, so there is no need for the landlord to take a deposit at all.

Abandoning the deposit entirely will mean the landlord will have no fear of accidentally falling foul of the TDP rules, for example if the form is mislaid. And the tenants will not have to find a large sum of money at the very time they face the expense of moving.

TenantAssure.com, a web-based tenant-checking service launched this week, offers to guarantee their approved tenant free, although the vetting service itself costs a hefty £150 including VAT, which will be passed on to tenants.

The sales director Simon Cutting, himself a buy-to-let landlord, says the official tenancy deposit schemes are too cumbersome and slow. "They are a sledgehammer to crack a nut," he says. "The problem is that administration is likely to be a big headache for landlords - I have seen the dispute form and it is quite complicated."

To get free cover up to the amount of two months' rent, landlords must download TenantAssure.com's standard tenancy agreement, under which the company stands guarantor for the approved tenant.

LetsXL, a tenant vetting company based in North Wales, is offering a " no deposit" scheme called Zero In to letting agents. Tenants will be charged a fee of £75 at the start of the tenancy to cover the vetting process, and will also pay a 3 per cent premium for the first six months of the tenancy instead of having to provide a deposit. For a typical rent of £500 a month the total premium would be £90, instead of having to find a deposit of six weeks rent, which would be £750.

Ian McDougall, sales director, believes that the inevitable delays in settling disputes will turn landlords against the official tenancy deposit schemes.

"The problem is when damages are disputed; our best estimate is that disputes will take 45 days to resolve, so it could be two months during which the landlord either cannot re-let the property or has to pay for repairs," McDougall says. He also expects the number of disputes to rise because they are free. The Zero In service will pay up immediately if approved tenants cause damage.

News
Bill Gates, founder of Microsoft and co-chair of the Bill and Melinda Gates Foundation
businessUber, Snapchat and Facebook founders among those on the 2015 Forbes Billionaire List
News
news... and what your reaction to the creatures above says about you
News
Homer’s equation, in an episode in 1998, comes close to the truth, as revealed 14 years later
science
News
news
Latest stories from i100
Have you tried new the Independent Digital Edition apps?

Day In a Page

The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003