Landlord and best-selling buy-to-let author David Lawrenson says he will not be giving any of his tenants a deposit replacement option.
He said that one reason is that with a traditional insurance-backed scheme, he gets to keep the actual deposit during the course of the tenancy – and says he can use the money to keep his rents competitive.
Only at the end of each tenancy, he says, does he have to ensure that he has the cash available to return the deposit.
Lawrenson, who uses My Deposits, says that he pays a one-off fee of about £20 for each tenancy.
He said: “So far, I have only made deductions in about 5% of my tenancies. One was for the whole amount, the others were all for less than £200. All the deductions were agreed by the tenant, none was disputed.
“Keeping the money is great for my cash flow, and the interest earned on the money is nice too.
“Of course, the useful idiots in Generation Rent and Shelter, would doubtless say, ‘Well, the tenant could do with that cash flow too – and it is hard for them to pay another deposit while waiting to get the money back off their old deposit’.
“I agree there is some truth in that.”
However, Lawrenson says there is a “killer” reason why he doesn’t like replacement deposit schemes.
He said: “When we assess tenants, we do reference checks, credit checks and check tenants’ bank statements. We want to know that the tenants can afford our rents comfortably.
“If a tenant could not afford to pay a five–week deposit because they were waiting for the deposit to come back from their last tenancy, that would indicate to me that they must be only a month or so away from not being able to pay the rent.
“That is not the sort of tenant I want! And that is the main reason why I won’t be offering ‘zero deposit tenancies’ any time soon.”
Lawrenson is the author of books including ‘Successful property letting – How to make money in buy to let’, and is a regular speaker on the topic.