Deposit schemes work by allowing tenants to pay money into an insurance policy instead of paying for a deposit up front.
Landlords and tenants are split on whether tenancy deposit schemes are a viable alternative to an upfront security deposit, research from letting agent Upad.co.uk has revealed.
Deposit schemes work by allowing tenants to pay money into an insurance policy instead of paying for a deposit up front.
A third (35%) of tenants reckon insurance deposits are a better idea than a regular deposit, though only14% of landlords are of the same opinion.
Only 10% of each group have even heard of such schemes however.
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.”
The data also found that more than three in five (62%) tenants aren’t concerned about paying monthly sum.
Nearly three in five (57%) landlords meanwhile have never had a tenant struggle to raise a deposit.
But Curran McKay, business development director of Canopy, which has a tenancy deposit scheme called DepositFree, looked at the other side of the coin.
He said: “A whopping 43% of landlords have seen renters struggle with a deposit and lose tenancy opportunities due to a lack of funds.
“Landlords need to be assured deposit replacement insurance does have high payout rates and offers cover for damage, tenancy arrears, cleaning, amongst other expenses incurred when issues arise.
“Switching to an insurance-based model may appear daunting at first, mainly because of misconceptions around insurance-based solutions.
“However, this model gives renters rightful control over their purse-strings whilst reducing void deposit periods for landlords, the costs of which outweigh any other perceived fears around expenses.”
McKay’s colleague Tahir Farooqui, Canopy chief executive, compared schemes to car insurance, which are now "the established way to protect motorists”.
