Ladybird Living – Your London Estate Agent
Illegal zero deposit
Tenants are feeling pressured to sign up for zero deposit schemes:
At the beginning of December 2022, the Observer newspaper reported that some tenants have been pressured by letting agents to sign up for zero deposit schemes as opposed to traditional deposits. These tenants stated that letting agents informed them that the property owner would prefer tenants who opted for a zero deposit scheme. Other tenants were given no option as they were told they must sign up for the zero deposit scheme as it was the condition of the tenancy.
Although zero deposit schemes are cheaper for tenants upfront compared to traditional deposits, the money is non-refundable once the tenancy ends. There may also be hidden costs such as having to pay additional renewal fees and tenants may also be responsible for any damages within the property.
There are many reasons why property owners and letting agents may prefer the zero deposit scheme. For example, traditional deposits are more time-consuming compared to the zero deposit scheme because it is a requirement for traditional deposits to be registered under a deposit protection scheme. Letting agents may also prefer the zero deposit scheme because they can earn commission as a result of it.
Legal perspective:
Pressuring tenants to sign up for zero deposit schemes or making the scheme compulsory is a breach of the Tenant Fees Act as tenants should have the freedom to choose for themselves. Therefore, the zero deposit scheme can be provided as an option, but it should not be a mandatory part of the tenancy as this would be considered illegal.
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