Deposit replacement service claims about offering ‘double protection of traditional deposit’ cleared by watchdog

Claims by a tenancy deposit replacement supplier have been cleared by the advertising watchdog after being challenged by a rival.

Zero Deposit challenged flatfair’s claims about the protection it offered.

Text on the flatfair website said in July: “Beat the deposit cap. Enjoy up to 12 weeks’ worth of protection and free recovery for any additional claims.”

Further text stated: “Keep your property protected. Get up to double the protection of a traditional tenancy deposit and significantly lower the upfront costs for your tenants.”

It went on to say: “You get extra protection. Tenancy deposits are now capped at five weeks rent. Make substantiated end of tenancy charges for up to the value of 12 weeks’ rent through flatfair.”

However, Global Property Ventures, trading as Zero Deposit, said there was no contractual obligation on flatfair to provide the protection advertised.

It challenged whether the claims “Keep your property protected” and “Get up to double the protection of a traditional tenancy deposit” were misleading and could be substantiated.

Flatfair said it was correct that flatfair did not have a contractual obligation to compensate landlords where tenants did not honour their full financial obligations under the tenancy agreement.

However, that did not mean that landlords could not have confidence in the protection offered by flatfair.

It said that flatfair’s service protected landlords in a way that did not exclude tenants unable to pay an upfront deposit.

Tenants could pay a one-off fee equal to a week’s rent plus VAT.

When the tenancy ended, the landlord or their agent would calculate any outstanding amount and notify the tenant. The landlord and tenant could then negotiate the sum.

If they could not agree, the matter would be referred to a dispute resolution service.

An option was that flatfair bought the tenant’s debt – up to 12 weeks of rent – and then recovered that from the tenant.

Where the amount owed exceeded 12 weeks rent, flatfair would help the landlord in recovering the full amount.

Flatfair said that, since the inception of their service, in 100% of cases in which a landlord notified them that the ‘established charge’ had remained unpaid for more than two weeks, and where the landlord complied with the referencing requirements, flatfair had chosen to purchase the debt from the landlord (subject to the cap equivalent to 12 weeks’ rent)

Flatfair said that the claim “up to double the protection compared to a traditional deposit” was therefore not misleading.

Flatfair also argued that its non-contractual model meant that operators such as itself were not bound by obligations to insurance underwriters, which might have led to claims being rejected.

It said that contractual obligations did not provide a 100% guarantee to customers. The company was, however, itself insured.

The Advertising Standards Authority accepted flatfair’s arguments, and Zero Deposit’s challenge was not upheld.

The ASA said that the claims “Keep your property protected” and “Get up to double the protection of a traditional tenancy deposit” had been substantiated and were not misleading.

Flatfair can continue to make the claims.

* In a statement released this morning, flatfair founder Franz Doerr said: “Our business was founded through a genuine desire to make renting fairer, more transparent and more accessible, and we’re delighted that this complaint has rightly been refuted.

“Deposits are a major bugbear for millions of renters, wasting significant time for thousands of agents.

“Our technology aims to make renting as easy as checking into a hotel and savvy agents are using our platform because they need a quicker process that enables tenants and landlords to communicate fairly, massively reducing conflict and distrust.”

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3 Comments

  1. HJ12

    And where are the millions coming from to pay for marketing and staff – who is funding this new portal – £100 a month subscription will not even scratch the surface?

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  2. KevopLets

    Am I reading this right…

    “Flatfair said it was correct that flatfair did not have a contractual obligation to compensate landlords where tenants did not honour their full financial obligations under the tenancy agreement.”

    Who in their right mind would sign up to this service replacing a cash deposit that provides no obligation to compensate…

     

     

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  3. Lil Bandit

    “Flatfair said it was correct that flatfair did not have a contractual obligation to compensate landlords where tenants did not honour their full financial obligations under the tenancy agreement.”  So does this mean that if a tenant doesn’t pay for any damages then it is up to the company who is profiting off this arrangement to decide at their discretion if they wish to pay the landlord? If so I am extremely concerned….

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