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News: Can a tenant who can't afford the deposit be trusted to pay the rent?

Sun, 06 Jan 19

Deposit-free renting is growing increasingly popular, with more providers than ever before now providing tenants with a range of nil deposit schemes, but is a tenant who cannot afford to find the deposit an inspiring applicant for a landlord’s property?

A recent YouGov survey found that 43% of renters would prefer to see tenant deposits scrapped and replaced with deposit protection insurance that pays for any damages to the property at the end of a tenancy, with tenants typically required to pay into the scheme through either a one-off payment, such as a week’s rent, or a monthly fee.

Tom Crosthwaite, head of sales at RentMyHome.co.uk, commented: “Nil deposit schemes are a helpful alternative to a traditional deposit as they provide protection for landlords at the same time as helping tenants who don’t have big reserves in place to pay a month's rent and six week’s deposit up front.

“This is often a hindrance to tenants moving and so a nil deposit scheme means landlords don’t miss out on good tenants who just don’t have large savings in place.”

Several organisations are calling on the government to get behind an insurance-based model as an alternative to a rental deposit. But not everybody is convinced of the merits of the insurance-based alternative to traditional tenant deposits.

Kris Kandiah, a letting negotiator at Benjamin Stevens, said: “I feel that a landlord would be less inclined to rent their property to someone who cannot afford to pay a security deposit and furthermore I can see that a landlord would be put off from a deposit replacement product. What would happen if the tenant wants to use their last month rent from the deposit and there are damages at the property when they leave?”

Kandiah believes that deposit replacement products will end working in a similar fashion to how councils used to use deposit bonds.

He added: “They [councils] now don’t use this [deposit bonds] as much as landlords weren’t accepting their tenants and they now pay landlords incentives as they know the landlords want the money and not an insurance based deposit or deposit bond.

“It is a product that is aimed at the rental sector where applicants can’t afford a deposit but the real question to ask is if they are unable to afford a deposit, can they be trusted to afford the rent and can it be paid in time.”

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