The Alternative to Cash Deposits
Demand for alternatives to cash deposits in Preston, Leyland and Chorley has rapidly increased in recent years. A generation of adults have been priced out of the housing market and it is predicted that by 2023, 22% of all households will be rented and people will be renting for longer.
Over 43% of tenants need to borrow to pay their cash security deposit. The impact of the COVID-19 and the current financial crisis have made the need to reduce the upfront costs of renting even more important.
From a landlords perspective cash deposits have been impacted by increasing regulation. Primarily the Tenant Fees Act 2019 which limited cash deposits to 5 weeks’ worth of rent. Then the complications of end of tenancy disputes which can take months to resolve with the government schemes resulting in delayed pay-outs.
What does a deposit alternative offer?
We did some research on the various deposit alternative providers and found that Reposit had the best offering on the market for landlords and tenants.
- 8 weeks’ worth of cover – Reposit gives you 60% more protection than a cash deposit. This is the most cover available compared to other similar products on the market.
- Increased demand, fewer voids – Properties advertised with a ‘deposit free option’ have been shown to attract 26% more click-throughs online, and will typically let quicker – helping you to sustain rent levels and reduce voids. Void periods cost UK landlords over £3bn per years, with individual landlords losing an average of £1,869 per year.
- Faster dispute resolution – If a tenant raises a dispute at the end of tenancy, Reposit will obtain a final adjudication verdict within 14 days, much faster than the traditional cash deposit schemes, which can take 6 weeks or more.
- Free of charge for landlords – If Reposit is chosen by the tenant, they will pay Reposit a service fee equivalent to just 1 weeks’ rent. Reposit is absolutely free for the landlord.
The Reposit cover is valid for any combination of rent arrears, damages, removals and cleaning – it is essentially a direct replacement for a traditional cash deposit.
Other important information
❖ With Reposit, it is the landlord who is protected by the insurance policy, not the tenant. The tenant cannot cancel the policy or make any other changes such as ending or extending the cover. Only the agent or landlord are able to do this.
❖ Tenants must pass referencing to be eligible for Reposit.
❖ Just like with a normal deposit, the tenant remains liable for any amounts due at the end of tenancy (e.g. cleaning fees, costs for repairs, outstanding rent).
❖ If the tenant does not pay at the end of the tenancy, Reposit will pursue necessary legal action to recover the outstanding amount, even if the landlord has already been paid.
❖ The tenant always has the choice to use Reposit or a normal cash deposit.
With no end in sight for the ongoing financial crisis the UK is experiencing households are tightening their belts. However people are still going to need to move and we are all aware of the cost of moving house. This includes renters who are most likely paying a larger proportion of their income on rent compared to those who have bought their home with a mortgage, especially as rents have increased dramatically over the last two years. Private renters spend on average 31% of their income on rent alone.
For renters moving costs increase when having to find a cash deposit as their old deposit is still tied up with the previous property, remembering release can take weeks after moving out. Renters for the foreseeable will be looking to keep costs down, even at the higher end of the market.
The recent Government release ‘A Fairer Private Rented Sector Report’ White Paper indicated that they are going to look at tenancy deposit cash alternatives. Therefore the outlook for cash deposits is uncertain.
Have you considered trying a cash deposit alternative? Why not speak with one of our team about your options. We have partnered with Reposit to be able to offer an additional service to our clients and as soon as your property is ready to market we can offer all potential applicants the choice.
Peace of mind
Of course, making sure you get paid at the end of tenancy is one of our key concerns. We selected Reposit as our partner because they are FCA regulated and FSCS protected. Their product is built upon a robust insurance structure in which you, the landlord, are the beneficiary. This means that once the Reposit is set up, you are directly and legally entitled to cover for all valid end of tenancy charges. As such they have always ensured reliable pay-outs, even during the recent disruption caused by COVID-19.
If you would like further advice on whether a deposit alternative is right for you and your property please give us a call on 01772 284606 and speak to one of our team. We've been helping landlords in Preston, Leyland, Chorley and the surrounding areas for 10 years.