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An alternative to rent deposits

May 18 2009
LetsXL‘s ‘Zero In‘ service will allow residential letting agents to offer ‘no-deposit‘ tenancies In a bid to make access to the housing market easier, the government is changing the laws that affect tenants and landlords. Prospective tenants have found it increasingly difficult to find a suitable property because of the large deposits landlords and letting agents collect to cover damage. These deposits are returned when the tenancy expires, but they can be as much as the equivalent of six weeks' rent. This makes it more difficult to get into housing. According to the Citizens Advice Bureau, 70 per cent of the 2.21 million private tenants in England have paid deposits averaging ¬¨¬£510, and one in five private tenants have problems with deposits being unreasonably withheld. However, a new business called LetsXL believes it has the answer. Its 'Zero In' service will allow residential letting agents to offer 'no-deposit' tenancies. The North Wales-based business, which offers referencing services to letting agents around the country, is offering this as an alternative to the government-approved methods of handling tenant deposits. After checking a prospective tenant's track record, the company will offer letting agents the possibility of providing tenants with an agreement which does not involve taking a deposit. Instead, the tenant pays an administration charge to the agent. At the end of the occupancy, the tenant remains responsible for any damage, but LetsXL will pay out should the tenant dispute or refuse to foot the bill. Wesley Weir, managing director of LetsXL, said the service provided two benefits to landlords and agents: "Properties become more attractive to potential tenants because the absence of a deposit means they have to find far less money up front. Deposits are usually the equivalent of six weeks' rent, so it's a major saving." "If there is a dispute over damages or repairs at the end of the tenancy, 'Zero In' will pay the agent's claim within 10 working days, so they can get the necessary work carried out and re-let the property relatively quickly." He added that the scheme was "a big improvement on the two government-approved schemes, under which it can take at best 45 days for disputed claims to be decided by arbitration." It is not clear what sort of tenants the service will benefit. Ian McDougall, sales director for LetsXL, pointed out that "it is down to the letting agents and the landlord to accept the offer." However, he was optimistic the scheme would have a broad application: "Even though it will be down to the letting agents to decide, we think that the initiative could be helpful to any kind of tenant." He admitted the company was taking a small risk in offering this product, as it might have to pay damage expenses more often than foreseen, "but the risk is offset because we do the referencing for the letting agents. We check what the track record of tenants is, and on this we base our decisions. Plus, we already provide cover on rent to our customers, which is a much higher cost than damage expenses." A spokesperson for the housing charity Shelter warned potential customers of this and similar schemes to beware of unexpected pitfalls. "No-deposit tenancies may seem an attractive way of avoiding paying up-front deposits, but tenants must be aware of other charges they may incur. "In some of the cases we have seen, tenants are charged a monthly 'insurance' premium in place of an up-front deposit. In many cases it is non-refundable, even if the property is kept in good order - unlike a traditional deposit." The spokesperson added that although a tenant might avoid paying a deposit, they could end up paying a large sum of money over the course of a tenancy. The measures have received strong criticism from the landlords' association and a warm welcome from housing organisations, but it is not yet clear to what extent they will help people who are having difficulties finding accommodation.
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