OpenRent Community

Deposit replacement insurance - is this a floor in this option being offered?

we have new tenants about to start renting and i noticed through the AST creation process the tenants have the option to choose a deposit replacement insurance scheme for the cost of one weeks rent (approximately).
If they choose this that’s all well and good but assuming they renew or continue to roll over the tenancy after the first 12 month AST period - what happens if they don’t renew the deposit replacement insurance by not paying the premium again - as a landlord we have no deposit scheme to call on if needed and no actual deposit (cash) held in any gov approved scheme. Am i missing something here or is this a gaping hole in the process and leaves landlords open to trouble. Any thoughts or experience greatly received

I would look into how long the insurance is viable. If it’s active for the duration of the tenancy, as in for as long as the tenant occupies the property, then this would be a moot point.

Because an improperly managed deposit can cause you to be sued for you to 3x the deposit amount, I think it’s worth making sure this is absolutely well handled. I believe citizens advice can give you information, and it isn’t a bad idea to do a consultation with a tenancy specialist solicitor/lawyer.

You could also do a two-minute quick Google search and you’ll get the answer and also understand why it’s a bad idea.

I have googled and have seen bad comments from a tenant point of view - but I’m specifically asking about the 2nd year of tenancy. Fortunately my tenants signed up today and paid the full deposit in the normal way so I’ve swerved it this time - but what about the next one - they may not?? Have any7 landlords had experience of this good or bad and can share?

yes what if they dont pay the second premium? with that method you are less in control… If a tenant cannot afford a deposit then it won t be long that they cannot afford the rent

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the insurance premium is for 12 months only - ie the length of the AST - so it would seem the tenant has to renew the insurance in the second year - if they dont or refuse to I have been told two options - 1. they pay a full deposit as normal or 2. you evict through the normal section 21 process on the basis that they have not paid a deposit or have a means to cover any damages/lost rent etc. Both options (difficult not impossible) to deal with if they have paid the premium in the first year

OpenRent has only recently started to offer this alternative and apparently it is set to default when setting up the AST. Why the hell is this ? Did they ask us landlords if that is what we wanted ?

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they will be getting commission on this ?

This must’ve happened recently?

When I did my last contract through them I August it wasn’t.

Given the choice I’d rather not offer the insurance option, as someone said above if they can’t afford the deposit how long before they can’t afford the rent. It’s not a good option in my opinion

No it isn’t at all. I didn’t realize it meant they haven’t paid you a deposit until I just looked into it more.

That scheme exists to help tenants who can’t afford a deposit, which probably isn’t your ideal tenant. I imagine the lawmaker’s logic is that surely the tenant will be able to save up in a year or will be happy to pay it again - but, no, I’m not seeing what happens when the insurance runs out but the tenant stays in the property.

To make matters worse, if the tenant tries to argue they weren’t given the option of a deposit then you may be liable for a ‘banned fee’. Paying a tenancy deposit - Shelter England

No, I definitely would not want to touch that as a landlord.

It sounds like your tenant hasn’t selected it. If they hadn’t then I definitely would not let it be an option in the future.

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Just seen the NRLA are hosting a webinar on the difference between the two options. Might be useful to join. Can be found here Regional Landlord Meetings | NRLA

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I bet they will want to SELL you the insurance one