Zero Deposit Renting: A Better Way to Rent
Zero-deposit renting? Whether you're a property owner or tenant, we'll uncover what it means and how to consider if it's the right choice for you.
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Before you rent a property, it is essential as the incoming tenant to pay a security deposit. This is an upfront fee paid to the landlord to cover any unpaid rent or property damage incurred during the tenant's stay. Most of the time, the security deposit is six weeks' worth of rent. The tenant must pay one month's rent alongside the security deposit.
With high city rental prices, tenants have to raise a considerable amount of money to cover the upfront fee. Some tenants cannot afford to raise such amounts when moving, and it is a costly experience for many people.
Many have to save up for a long time before the money adds up, or go into debt. Having an excellent place to lay your head after everyday work is essential, so there is little or no choice.
Renting a home can be very expensive; the cost of the required security deposit, the first monthly rent, plus the unavoidable cost of moving from your old house to the new space. Anyone who has ever experienced renting a home can relate. Even property owners are not exempt from this experience.
They are mandated to keep the deposit received from tenants in a registered protection scheme 30 days after receiving it - and failure to do this could impose a significant fine on them. At the end of the tenancy, the property owner returns the deposit money after ensuring the property hasn't undergone any damage. Otherwise, the landlord has all right to withhold this money and use it to recoup any losses or damage incurred.
A mechanism has been put in place to cut down these expenses and reduce the stress of saving up for deposit fees, making everything easier and faster for you, the tenant, and the property owner. With this mechanism, you do not have to waste time before you move into the property, and the landlord doesn't have to go through the stress of keeping money into an account that earns no interest.
This mechanism is known as Zero Deposit Renting.
What is Zero Deposit Renting?
Zero Deposit Renting is a new system of renting properties where tenants can quickly move into their ideal apartment without having to worry about paying the usual huge upfront security deposit. This new type of renting serves as an alternative to the traditional security deposit; it is faster, easier, and more affordable for the tenants, the property owner, and even the letting agent.
Zero Deposit Renting is basically renting deposit free!You know how time-consuming and costly renting a home can be. It's an experience that can potentially leave your pocket dry for a long while even before receiving the keys to the property. Now imagine not having to spend a long time saving up for a rent deposit; how wonderful would it be? It's way better than whatever you're imagining, I promise.
What if a family is looking to move out of their current apartment but constantly worrying about paying for the security deposit? Or a student who just received admission to study in a different country does not have enough money to cover the security deposit required? Maybe you've always wanted to move out of your apartment to a new one just for the thrill of it, but the expenses associated with finding a new place has been holding you back?
The Zero Deposit Guarantee scheme may be the best option for you, and as you read further, you'll see why you should consider it.
The Good, the bad, the ugly?
Instead of the typical six-week security deposit you're required to pay, you can now pay a non-refundable fee equivalent to one week's rent to the property owner alongside the rent of the month. This fee can be paid by a single person or divided between the co-tenants if there is more than one. Some other guarantees allow the tenant to rent a property without paying anything upfront. This renting system does not affect the property owner; nor does it affect the tenant or the letting agent.
You may be wondering, "It's too good to be true! What's the catch?" - trust me, there isn't one. Although the system of Zero Deposit Renting is not the same everywhere, one thing that will always remain constant is that the tenants don't have to pay a security deposit fee. Aside from that, the landlord's right to property protection is not taken away. If the property gets damaged at any time throughout the tenant's stay, the zero deposit company would firstly handle the payment of the landlord's loss.
Afterward, they would get back whatever they paid the property owner from the tenant (the right to recuperate this sum from the tenant would have been stated in the contract signed by the tenant during the renting process).
Advantages Of Zero Deposit Guarantee To The Tenants
- It is easier and faster: Nothing beats the ease that comes with renting an apartment deposit-free! No matter which side you're looking from, it is still great. A week's rent initial deposit is far more comfortable to pay than a six-week security deposit. You can move from one home to another almost immediately because you don't have to wait long to gather money for the second deposit.
- You get to pay less upfront: This is an advantage that allows you as a tenant to save for other bills you might want to take care of. Since you will not pay as much as is usually required, you can divert the rest of your money to something else.
- With Zero Deposit Renting, you have more than enough freedom when you want to move from one property to another. You are open to opportunities across the country to explore in terms of job opportunities, schooling, family decisions, and other life-changing opportunities. The convenience of not spending a lot of money when renting a new property gives you freedom and confidence as a tenant.
- Zero Deposit Guarantee is not a compulsory way to rent. The tenants are given two options; to either choose the traditional deposit method or to choose Zero Deposit Renting. It's your choice to make, and you've to choose one that is most suitable and comfortable for you. The freedom to choose what you want plus the availability of options make renting properties a little more enjoyable.
Zero Deposit Renting For Property Owners
Merely looking at a Zero Deposit Scheme, one would think that it is most advantageous to the tenants. But if you think about it more deeply, you'd realise property owners have a lot to gain. Most landlords take issue with the zero deposit idea; perhaps they are not entirely convinced. Who knows? There is a high chance that they may have some concerns. If you're a part of this group of people, let's discuss some of the apprehensions you may have.
A few concerns that you might have as a property owner:
- How sure is it that I'll receive a fair claim at the end of the tenancy?
After the tenancy, evidence of any claim disputed by the tenant goes to the company for a thorough review. Suppose the review's result favours the property owner. In that case, the company will pay the property owner for the damage, and this process happens without delay since there is no regulation like the deposit protection schemes.
- What if the tenant changes their attitude at the end of the tenancy? They do not have anything to lose anyway.
Do not ever forget that the tenant is fully responsible for the property, whether they have something to lose or not. They shall be held accountable for any damage found on the property after their tenancy is over. Therefore, the tenant will not be let off the hook if anything goes wrong in the end.
- Why find a better way to rent when the old method is working just fine?
It is important to note that a zero deposit scheme does not rule out the usual security deposit method. It only provides more options for the tenants and you as the property owner.
Why Should You Consider Zero Deposit Renting As A Property Owner?
Property owners enjoy several advantages by choosing this renting system, and some of them are explained below.
- It is less stressful for you as a property owner since you have no deposit to safe keep or return to the tenants at the end of their stay.
- With Zero Deposit Renting as an option for your tenants, there will be more people showing interest in your property. It broadens your customers' net for more to come in as many people will respond more to a zero deposit than the traditional security deposit offer.
- You still receive your rent in full; therefore, minimal financial risk is involved. Whether the tenants choose the six weeks deposit option or the zero deposit option, your monthly rent is not affected in any way.
A Few Disadvantages You Should Know About
- One drawback you should note as a property owner is that not everyone will prefer Zero Deposit Renting. Some tenants won't like the idea of paying a non-refundable fee to you. Instead, they'd prefer to pay the standard six-week deposit as it will eventually be returned to them.
Some tenants can afford to pay a deposit upfront. These types of tenants would prefer the traditional system of renting to Zero Deposit. Tenants like students might not be able to afford a deposit; so introducing a zero deposit option is something they'd appreciate. It is important to understand your tenant, their needs and capacity, and use this knowledge to provide the best solution.
- As a property owner, you also need to know that your ability to claim any damage after the renting period is over solely relies on the zero deposit company still existing. In some cases, the company can go out of business before you need to claim. You won't get any protection from them for any damage made on your property because of this.
A property owner needs to weigh the pros and cons before adding a zero deposit guarantee as a choice for the tenants. Although it's more likely that more people will go for Zero Deposit Renting as time goes on, you must be sure that this system is suitable for you and your tenants. Be very careful not to force any tenant into choosing this renting system. The tenants must fully understand all the processes involved and weighed up the options available before signing any paperwork.
How does Zero Deposit Rent work?
The first thing to do is to review the property owner's zero deposit guarantee. Be sure it's something you want to dive into before signing any paperwork.Once you understand the terms, you can now make your non-refundable fee equivalent to one week's worth of rent. Your property owner gets a guarantee covering the standard six-week security deposit once this payment is made. Still, you remain accountable for any form of damage caused on the property throughout your stay there.
If, after your stay, the property is in a good state; no damage, outstanding rent, or other bills, then no further action is needed. You are permitted to vacate the property without paying any more fees.
But, if you caused damage to the property or have an outstanding bill, the zero deposit company compensates the landlord, and you'd have to pay the company back any money used to fix the damage.
Zero Deposit Guarantee is open to everyone looking to widen their choices when choosing an apartment. Now that you understand all that zero deposit renting entails, you might want to jump on it immediately.
Keep in mind that many zero deposit schemes are running in the United Kingdom, and every scheme has slight differences. So be very sure of what you're doing before signing up for anything.
Want to read more? Check out our blog on The Tenant Fees Ban Explained For Landlords.
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