What is deposit-free renting?
There has been a sharp rise in the number of letting agents signing up to Zero Deposit Guarantee (ZDG), according to the latest figures.
ZDG is one of several schemes that offer deposit-free renting which are proving increasingly popular with landlords, agents and tenants – currently, there are 850 letting agents signed up to Zero Deposit’s FCA-regulated deposit replacement product.
The scheme, and others like it, is designed to reduce financial pressures on renters, while also offering greater security to landlords. So how do they work and is there a catch?
In most cases, such as with ZDG, instead of a tenant putting down what is usually around six weeks’ rent as a deposit, they pay a week’s rent into the scheme which is underpinned by an insurance policy.
The benefits for landlords, according to ZDG, is that by offering a more affordable solution for tenants, they could potentially attract a wider audience of would-be tenants that may translate into faster renting and higher rents.
In the case of ZDG a landlord is covered for financial loss or damage up to the value of six weeks’ rent and tenants remain liable for any financial loss or damage as set out in your tenancy agreement.
Should you believe there is any financial loss or damage suffered by you under your assured short-hold tenancy agreement, and you have failed to reach a settlement directly with your tenant, you request to make a claim.
The company encourages settlement by negotiation, but in the event of this not working, you – and your tenant – will be asked to provide evidence and the claim passed onto an evaluation partner who will review the it and determine whether the tenant is liable for any financial loss or damage and, if so, the amount due to you.
For landlords, there is little risk, although there are arguably more hoops to jump through if you do need to make a claim at the end of a tenancy.
But there are concerns that schemes like this will end up costing tenants more in the long run. Zero deposit policies are non-refundable, whereas tenants who comply with all their tenancy obligations more often than not receive all of their deposit back at the end of their agreement.
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