Deposit replacement schemes have begun bolstering their propositions in a bid to add more value for letting agents and landlords with the tenant fee ban due at some point this year.
Franz Doerr, co-founder of flatfair, told EYE that the business is developing technology beyond just the deposit alternative, while Zoopla-backed Zero Deposit has launched a service dedicated to independent agents, having previously focused on larger brands.
Doerr said flatfair is being used by agents such as Spicerhaart and Chestertons as well as large private landlords including Bedford Estates.
Under the proposition, tenants pay towards a ‘flatbond’ – a week’s worth of rent – before the tenancy starts. In return for this, landlords are covered for 12, rather than the usual six, weeks of rent.
Everything is managed on flatfair’s online portal, and as with a normal deposit, the tenant remains liable to pay for any damages costing up to the equivalent of six weeks of rent. The idea is that they are thus incentivised to behave responsibly.
Flatfair offers independent resolution by H F Resolution. If a tenant is found to owe money and fails to pay, landlords also get an option for flatfair to buy the debt from them so they are not out of pocket and the scheme then pursues the money itself.
Doerr said: “We are developing additional products that we will launch alongside our alternative deposit product.
“These products will help agents and landlords with their costs once the fee ban comes in.
“We are working on the basis that the ban will be introduced in April.”
Meanwhile, Zero Deposit founder Jon Notley said almost 850 UK letting agency offices now offer the Zero Deposit Guarantee, which includes brands such as Connells and Knight Frank.
Tenants using the service pay the equivalent of one week’s rent for a Zero Deposit guarantee, which is non-refundable and gives the landlord effectively the same cover as a six-week tenancy deposit. This guarantee is backed by insurer Great Lakes Insurance SE and is a regulated financial product.
The tenants remain fully accountable for any damage or unpaid rents. Any disputes over claims by the landlord can be sent to TDS, who will review the evidence and provide a fair adjudication. Zero Deposit pays the landlord quickly in the event of an approved claim.
Notley said: “Tenancies covered range from lower value lets in the regions through to high value London apartments. The product is appealing to all segments of the market with every age and property type covered.
“Tenants hugely appreciate the financial freedom our product offers, while agents and landlords are attracted to the genuine protection and credibility of our fully FCA regulated guarantee, with all of the safeguards that brings.”
“A big development in recent weeks is the launch of Zero Deposit’s Independent Agent product, which gives smaller agents access to the product for the first time.
“We already have 30 independent agents live in our launch group, and many more who have expressed interest in joining our network. Having rolled out to a number of larger agent groups in 2018, it is great to now be able to offer the product to the whole agent market.
“This is especially relevant given the news that cash deposits are likely to be capped at five weeks’ rent, whereas our product offers landlords six weeks’ protection, along with referral commission to agents.”
It comes as the Tenant Fees Bill will return to the House of Lords for its third reading on January 15 before any amendments are considered by both peers and MPs.
Depending on how long this takes, the tenant fee ban could come in during either April or October, bearing in mind that compulsory Client Money Protection insurance will have to be implemented first.