OpenRent Community

Nil Deposit Schemes

There’s a lot of talk about ‘Nil Deposit’ schemes as an alternative to ‘Tenancy Deposits’ at the moment. Are OpenRent on board? Have OpenRent partnered with a Nil Deposit company?

Hi Clive,

We don’t have any such partnerships so aren’t able to advise on Nil Deposit schemes.

We’re a platform for private landlords and most who use us will opt to take a deposit. That said, it’s not unheard of for landlords to not ask for a security deposit at all - it’s entirely their decision!

George

Thanks George for the prompt response. I might suggest that OR seriously consider ‘Nil Deposit’ schemes as an option. I think a lot of landlords are already realising the potential and advantages of such schemes and as a leading on-line letting agent/platform OR will not want to be left behind.

Clive

Hi @Clive, thanks for raising this. As you mention, these schemes are getting a lot more attention now. So we’ve had our eye on them but want to make sure we get it right.

Would you mind going into some more detail about the the ‘potential and advantages’ of these schemes? (Feel free to ask any other landlords you know to post here too.)

Maurice

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Hi Maurice,

Please see the attached.

Clive

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Thanks Clive, I’ll take a look.

Maurice

Hi Maurice,
A few prospective tenants have asked about this scheme. It does help landlords to attract a wider range of tenants especially as more and more other agencies have started offering it.

For good tenants, it is nothing but yet another trick to steal our money. One might be talked into that by some really smart agent, but the money one pays will never come back, unlike the deposit.

There’s a lot of attention around reforming deposits at the moment. I’m currently putting together an explainer/guide for everyone because of the interest shown here!

Some ideas that exist in the policy world are:

  • Deposit passporting (i.e. making it easier to move deposits between tenancies when tenants move)
  • Combining the three accredited schemes into one single scheme
  • Having the government offer a deposit replacement loan/product
  • Having deposits be registered in the tenant’s name, so that it’s easier for them to get the money back after a tenany, and put it into their next tenancy

What’s clear about products like nil deposit schemes is that they are worse for tenants in one clear but important way.

They cost tenants a week’s rent which they otherwise would not have had to spend. It’s more affordable in the short term, but keeping all other things equal, will cost them more in the long run, because they still have to pay up for any damages.

In this sense, they are a ‘poverty premium’. Tenants who can afford 5 weeks’ rent (to which deposits will be capped from 1st June this year) for an upfront deposit don’t have to pay the extra week’s rent. Only poorer tenants have an incentive to pay it.

Another consideration is that agents are often offered commission to promote various products to their tenants/landlords.

These products do have a good side, which as many of you have mentioned, is that they make renting more affordable for tenants up front, removing a barrier to entering a tenancy.

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Sam, I agree with all you said, but I’m afraid you’re too kind and because of that you did not consider another group of people who’d be glad to lose a one-week payment.

Let’s try to imagine a potential customer of this scheme. What kind of person is ready to lose a week payment rather than put on hold a five weeks one? Well, I can only think of two.

The first one simply does not have five weeks worth of money nor the possibility to borrow such a sum anywhere. Which begs a question - doesn’t it indicate that such a person simply cannot afford a property for that price? If I was a landlord, I would have definitely thought exactly that.

The second one has never planned to get any money back, deposit or not because he was going to stay for six months without paying in the first place. In this case, of course he would prefer to lose just one week worth of money rather than five.

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Possibly - but I think the best tool to find that out is a tenant referencing report, which will tell you for sure.

Very interesting topic!

maybe it is, maybe it isn’t…

what would your report say about a person, who has £1 000 000 on their bank account and zero income?

or about a good working guy, who has never missed a payment in 30 years, but has recently fallen victim of a residential parking scam, fighting it now to set aside, but has an unsatisfied CCJ at the moment?

Hi Clive and all who commented!

We’ve put a guide up to the main deposit replacement schemes, here.

Let me know what you think!

Sam

https://blog.openrent.co.uk/rent-with-no-deposit-a-guide-to-deposit-replacement-insurance/

Hi Sam,

Thanks for this. Another scheme provider that I am seriously considering is Blinc UK. The guide summarises the options well.

Clive