Landlords and tenants are unaware of the benefits of insurance-based tenancy deposit schemes, a new survey has revealed.
The insurance-backed schemes see tenants pay a monthly insurance fee instead of paying a deposit upfront. It means that if there is any damage at the end of the tenancy, the insurer covers the cost.
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It could be particularly helpful for tenants who struggle to save for a rental deposit, which they need to pay at the start of a tenancy along with their first month’s rent.
The advantages for landlords
There are advantages for landlords too as it means they can advertise deposit-free renting of the property – something that is attractive to a potentially larger number of tenants.
The insurance will cover everything expected from a traditional deposit, including accidental and malicious damage in addition to elements such as arrears.
The claim process is also quicker, which can help with landlords budgeting and cash flow if there is any damage to be paid for.
With these advantages in mind, it would appear that most tenants and landlords would welcome the use of insurance-based tenancy deposit schemes.
Awareness about the schemes
However, research by letting agent Upad found that many landlords and tenants are unaware that the schemes even exist.
It found that 91 per cent of landlords had not heard of the schemes while an almost identical percentage of tenants were in the same boat at 92 per cent.
And yet it is clearly something that could help the 55 per cent of tenants who struggle to find a deposit to pay upfront for a rental property.
Deposit alternatives ‘always welcome’
James Davis, chief executive of Upad, said: “Alternatives to paying one-off deposits are always welcome, and these schemes are a great idea.
“Immediately, tenants will be free of the struggle of having to raise a deposit for a new rental before they have got their existing deposit back, and those who are unable to raise a deposit at all, or have no means of borrowing the money, could find themselves able to rent a far wider range of properties than they previously could.
“I am definitely in favour of such schemes and hope in the coming months a greater proportion of landlords will also take this point of view.”