Is the day of the tenant’s deposit about to be over?

| Rayhan Rafiq Omar

It’s without doubt the most painful and stressful part of renting: forking over large amounts of money to keep landlords feeling comfortable.

The tenancy deposit was so abused that it took major legislation and punitive rules about returning deposits in a timely manner.

Legislative guidance is always tricky. Boris Johnson’s ‘London Rental Standard’ didn’t quite hit the mark: https://twitter.com/rentpro/status/867698819856822272

For many tenants, the fact they need to hand over one deposit while a previous landlord still holds their cash is debilitating. We all witness the stress this causes tenants.

To help, a number of solutions have come to market in just the last 12 months.

Some of these solution providers have already faced off with spats on twitter about which method is better: looking at you Curran McKay and Kristjan Byfield.

If you weren’t witness at the time, it’s well worth a read: https://twitter.com/curranmckay/status/815978914912862208

So what can tenants do instead of handing over a deposit?

If you guessed insurance, it’s certainly the most funded option: Curran McKay’s Reposit is backed to the tune of £400k and Jon Notley’s Zero Deposit Scheme has the backing of ZPG.

The product is fairly simple: instead of handing over a six week deposit that you may or may not get back, pay one week’s rent to purchase insurance for your landlord in-lieu of handing over a deposit.

Whether the claims process for these new insurance products are to landlords’ expectations is yet to be tested.

There’s no doubt that – given the choice – many tenants would prefer this option. But one thing is for certain at this point: it won’t be the tenant’s choice.

If a landlord wants a deposit, will a tenant really forgo the property? And what incentive does a landlord have for wanting insurance instead of a deposit?

A smart colleague of mine is often heard saying if the customer experience isn’t ten times better than what people normally do, then people will stick with what they normally do.

Enter Kristjan Byfield of Base Property Specialists and his new product: The Depositary.

The service hasn’t yet launched, but is clearly targeted at helping lettings agents by automating the process of administering deposits.

The Depositary has partnered with TDS, the largest deposit protection scheme, which would make it much easier for a landlord’s agent to adopt the system.

Will this be better for a tenant? If you read the twitter spat, then Byfield certainly believes it’s a win for the tenant with better communication and no need for extra fees.

In a world where legislation in England will soon mirror that of Scotland by banning tenant admin fees, reducing risk and cost will be top of mind for lettings agents.

That could play into the hands of The Depository and prevent the adoption of insurance-based deposit replacement schemes.

But then again, with Zoopla’s backing of Zero Deposit Scheme, that could make offering the choice to tenants an automated option that pays agents a commission for introductions.

Either way, tenants should win with increased choice to suit their concerns. It’s about time Generation Rent benefited from innovation.

You can view the websites of the three schemes mentioned here:

https://getreposit.uk/

http://www.zerodeposit.com/

http://www.thedepositary.com/

 

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13 Comments

  1. Robert May
    May 30, 2017 at 07:07

    The timing for this isn’t now that’s why it’s a product that got blanched and put in my deep freeze about 6 years ago. I have a fairly solid history of delivering solutions to the  sales & letting industry, my products and  standard operating procedures still dominate the sector. It might be best just to hold fire and sort out the issues affecting the successful delivery of this solution before getting too excited about its financial opportunities.

    If there is an appetite for this change I’ll thaw out not just this product but the full suite of interdependent products too.

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  2. ajayjagota75
    May 30, 2017 at 08:29

    Good to see rayhan do his research  into the deposit replacement market… selecting one that is not an insurance product and one that is yet to launch!

    A little research may have led him to one that is an insurance product that has launched and is being used currently by national and regional agents who are all Dlighted

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    1. rayhan
      May 30, 2017 at 14:02

      Apologies Ajay, I should have mentioned Dlighted. I guess I’ve heard so little recently and assumed it wasn’t a going concern. 

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      1. ajayjagota75
        May 31, 2017 at 01:14

        Rayhan – I find that remark even more offensive.
        I would have thought a simple Google search wouldn’t have been beyond a proptech reporter, which would have shown some of the below articles – all from this year!!

        NOBODY has campaigned more than me to highlight the issues of cash tenancy deposits!! 

        Had you made contact I would have informed you that we have created a policy that offers agents over £500,000 of cover for damage, rent and legal with a claim frequency running at  2% claims that’s with more active policies over a longer period than any other provider in the market.  

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        1. ajayjagota75
          May 31, 2017 at 08:12

          FYI I left a list of many articles in the post to demonstrate the point but it has been removed !! 

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  3. Elliot13
    May 30, 2017 at 08:39

    This article is very poorly researched. I’ve used Reposit before and the check-out process works very well, also there are other options that she’s missed in this space like InsureStreet and flatfair (although I haven’t tried them.)

    Also, Reposit already pays agents a commission, and Zero Deposits seems to be the same idea without having launched yet from what I can see? Although Zoopla backing will make a big difference.

    Haven’t heard of the Depositary but I don’t use the TDS.

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    1. rayhan
      May 30, 2017 at 14:17

      Hi Elliot,
      Thanks very much for surfacing Insure Street – certainly worth a mention with their £500k+ funding earlier this month. 
      Not so sure Flatfair would warrant a mention. Seems like a few guys with a website looking for a CTO. Doesn’t shower me with credibility to do such things. 
      Like you said, I focused on what was newsworthy: the zoopla backed scheme, the start-up and the industry insider. 

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  4. Woodentop
    May 30, 2017 at 12:39

    First hurdle: Whether the claims process for these new insurance products are to landlords’ expectations is yet to be tested.

     

    Second hurdle: Commitment by the tenant to behave, fundamental reason why we ask for a deposit. Not having to clear a mess up afterwards with some gimmicky claim scheme.

     

    Third hurdle: Convincing anyone it is better than what we have. Sounds more like making life easy for tenants when the liability is the landlords.

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  5. KByfield04
    May 30, 2017 at 15:15

    There remains a lot of debate in this area as to what is the best solution for all concerned. Personally I still have questions about the tre value of an insurance product for long term renters Vs a cash deposit. I know that many agents and Landlords also share my concerns over the attotudes of those ‘borderline’ tenants- the ones who are good becuase of the cash liability. How will these tenants act in a property when a £200 policy can give them £1200 worth of damage cover. Will they care if they burn the worktop with that hot pan? Will they still lift that sofa rather than drag it? However, it is always exciting to see our sector evolve and seek new solutions to old problems. My early days spat with Curran (with the agression very much coming from my side) has since subsided as I have accepted that our industry is evolving in to a multo-tiered offering with agents and landlords alike picking and choosing dofferent solutions to best suit them, their tenants and their objectives. Only time will tell who wins out overall.

    Whilst the products will save agents & landlords some time upfront and negate the liability of breaching registration reg’s (and the applicable penalties) the end deductions process will be virtually identical whether there is insurance or cash and, as such, our platform (The Depositary) will function seamlessly with any solution. We have developed the product in close collaboration with TDS and will be launching exclusively with them and will see how matters progress from there. That said, our initial launch product is the first in an array of features that will focus on the overall compliance of all regulations pertaining to residential lettings- so this is the first release of a very big & ambitious project ahead.

    Personally I feel one of the biggest challenges currently facing the alternate insurance model is the number of suppliers rushing to market. I am aware of at least 7 to date, many with quite substantial funding behind them, yet I have seen limited uptake to date by agents and Landlords alike. Surviving whilst they get traction and retaining enough marketshare is probably their biggest hurdle to overcome in the early stages as they fight to change the opinions fo Landlords and Agents alike.

    As always, exciting times ahead as our industry continues to evolve.

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    1. Woodentop
      May 30, 2017 at 17:52

      You can’t mend something that isn’t broken! There will always be a threshold when one can afford and another cannot. I’m open to new ideas but all I see is someone trying to make money by peddling what is financially best for them and not the landlords liabilities. You can have as much insurance cover as you like but unless the tenant is liable to a penalty you have not helped one bit, made things worse. There is law to govern “Lettings” but it has always been more sided towards tenants advantage.

       

      Time to make it a criminal offence to sub-let (fraud), damage (criminal damage) and rent arrears (precuniary advantage). Then you can get rid of deposits? 

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      1. KByfield04
        May 30, 2017 at 18:48

        I think as an industry (agent & landlord) indeed- there is little ‘broken’. But that doesn’t mean things won’t change. An evlving market is great for the consumer and that is the society we live in where the consumer comes first. Our ‘solution’ is about streamlining what we think is a good structure taking the admin burden off agents- we estimate reducing end of tenancy admin by around 75% whilst delivering tenants what they want- a digital platform to progress matters whenever they can/want in a clear and set process platform. Win/win as far as we can see. This is just our first product launch- our focus is on digitising regulatory compliance across the entire UK resi rental sector- it’ll take time but we believe this will drive up standards, drive out cowbots and bring private landlords (some not all) in to the agency world. Just some small objectoves to achieve!

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      2. jimione47
        June 12, 2018 at 13:52

        Woodentop seems to be an apt name for you.
        What an absolute load of rubbish. The letting world has always been geared towards siding with the landlords, or failing that, didnt actually care either way. Thats why so many of you got away with taking hundreds of pounds from people because they put up a picture with a hook and didnt make the pin ***** hole “good” after they left, or wear on the carpet being claimed for out of thier deposit.

        Yes ok, you have to keep the house up and you have to replace things but dont take it out of the deposit, use the ridiculous sums you charge every month for the rent. I hear so many landlords complaining they dont make a profit, rubbish. If you wernt making profit, you wouldnt be in the game.

        Time to make it a criminal offence to hassle tenants and not leave them to enjoy thier home in peace and quiet, (harrasment) lie about not knowing the usage of the electric and average costs on moving in (witholding information that could cause undue stress), charging obscene amounts for rent (stealing) refusing to do repair work and blaming it on the tenants when you know damn well its been a problem for a long time (fraud?)

        Landlords are out to do one thing, make money, and money corrupts. The more you get the more of a greedy ass you become and suddenly that £500 to get a hole fixed is akin to taking away a fat kids precious candy.

        I like the insurance idea for short term let of a year. Anything more than that and it becomes a pointless drain on the tenants purse, a bit like every other insurance.

        You keep charging ridiculous amounts for a deposit and it will go this way, lower your deposits and things may get easier again. If you are worried about damage, get a reference before they move in, no reference no let or a guarantor.

        Please dont make out that tenants are all evil. There are just as many (if not more) ass landlords as there are tentants.

         

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  6. CMcKay18
    May 30, 2017 at 18:49

    Well I did wonder why I woke up to 14 follow requests on my Twitter this morning. I naturally presumed it was my witty commentary on the #BattleforNo10 last night but it makes sense now.

    Thanks for the article Rayhan but it might have been worth speaking with me first. We’ve processed plenty of checkouts, charges and arbitrated the odd dispute through our platform over the last 18 months so it has been tested, and it works.

    Also, the point about paying an agent commission has been part of the Reposit model since the beginning and we’ve paid thousands of pounds to our partner agents in referral fees consistently every single month. This similarity is also true for every other part of the ZDS model but you’ll have to wait a little longer for the details on that one 😉

    Kristjan and I have certainly argued out our differences but having heard him speak at many events, he is a passionate and articulate champion of the independent agent and that is certainly needed in these times. I also have respect for anyone who strives to change the way things are done, in whatever format and our industry is certainly changing.

    Heres to an exciting few months.

    Best,

    Curran

    P.S. To all those who saw this thread and tried to follow me on Twitter, donate £20 to the MS Society through https://donate.mssociety.org.uk/ea-action/action?ea.client.id=1692&ea.campaign.id=54734 and email the receipt to curran@getreposit.uk and I’ll let you into the juicy gossip.

    P.P.S I think it was a draw 😉

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