Ladybird Living – Your London Estate Agent
Deposit alternative tenancies - what are they?
Deposit-alternative tenancies provide advantages for tenants, landlords, and letting agents by offering a distinctive selling point. But how can agents effectively promote this option to landlords?
These tenancies allow agents to lower tenants’ upfront costs while still protecting landlords from rent arrears and property damage.
In the UK, the standard deposit is typically five weeks’ rent. With average rent in England reaching £1,470 as of July 2024, a typical deposit is around £1,837.50—a significant financial burden for many tenants.
As inflation rises and average rent arrears claims hit £2,092, agents need to consider alternatives that ease tenants’ financial strain without compromising landlord protection. Deposit-alternative schemes are growing in popularity, though some agents may view them as risky.
What Are Deposit-Alternative Tenancies?
Also known as deposit replacements, these tenancies allow agents to offer an alternative to traditional deposits. Rather than paying a deposit equal to five weeks’ rent, tenants can opt for a deposit-alternative scheme, such as Reposit, which requires just one week’s rent. However, tenants are still fully liable for any end-of-tenancy charges.
If there are charges for property damage, cleaning, or rent arrears, agents can register them through the Reposit platform at the end of the tenancy.
How Do Deposit-Alternative Tenancies Work?
Under these schemes, tenants pay one week’s rent upfront. For example, if the average rent is £1,470, the tenant would pay £339.23, saving £1,356 compared to a traditional five-week deposit.
Unlike traditional deposits, where tenants receive their deposit back at the end of the tenancy, deposit-alternative schemes retain the upfront fee. Reposit covers landlords for up to eight weeks’ rent, despite the tenant only paying one week upfront.
Who Benefits From Deposit-Alternative Tenancies?
Deposit Alternative tenancies benefit both landlords and letting agents.
For agents, deposit-alternative tenancies streamline the move-in process, reduce admin time, and generate additional revenue. For landlords, these schemes offer increased protection, with coverage for up to eight weeks’ rent, and reduce void periods by making properties more accessible to tenants who may struggle to pay large deposits.
Disputes are resolved quickly, with issues being settled within 14 days, and landlords typically receiving payouts within 20 days.
When Can Deposit-Alternative Schemes Be Used?
Agents can introduce these schemes once a suitable tenant is found. Some platforms, like Reposit, allow tenants to switch from a five-week cash deposit to a one-week alternative mid-tenancy or at renewal, providing landlords with added protection for the renewed rental amount.
However, tenants must pass referencing checks to be eligible for a deposit-alternative scheme.
How Do Tenants Apply for Deposit-Alternative Tenancies?
Tenants interested in these schemes must pass identity and affordability checks before being approved.
The information in this post is valid to the best of our knowledge on the date of posting. It is advised that you seek independent advice based on your individual circumstances.
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