Specialist tenant referencing and insurance provider Let Alliance is the latest to enter the zero deposit market.

The firm, which completes some 200,000 tenant references a year and guarantees rents worth more than £360m, has launched a Nil Deposit Scheme.

Under the scheme, tenants will pay one week’s rent as a deposit and the Let Alliance then provides a guarantee, backed by insurer Great Lakes, to the landlord for up to six weeks’ rent if a claim is made.

Let Alliance, which works solely through letting agents, will negotiate with the tenant in the case of any disputes and can arrange adjudication with one of the Government-backed deposit schemes. If the tenant is deemed responsible for damage then Let Alliance will automatically pay the landlord and pursues the renter to recover any outstanding debt.

The scheme is part of a new Fit for the Future initiative that Let Alliance is piloting with Martyn Gerrard, Ryder & Dutton and Boydens.

Fit for the Future provides a package for letting agents to provide liability insurance for tenants, rent guarantees for landlords and the Nil Deposit scheme. Agents receive an introducer fee of 20 per cent of any payments a tenant makes for these products.

Letting agents don’t have to offer all the services but if they are providing the Nil Deposit Scheme the tenant will need liability insurance either from Let Alliance or another provider.

Tenants can choose whether to use the mainstream schemes or the nil deposit service.

EYE queried whether this would create less responsibility for tenants as the deposit is smaller and there is no risk of losing a big sum if damage is caused.

Andy Halstead, founder of Let Alliance, said that was a risk but the company references anyone using the scheme and would pursue them for payment.

Halstead said: “Fit for the Future is a service that we have spent many months developing, and which will provide essential support for letting agents in this challenging market environment.

“Our research shows that it is a service the industry is crying out for.

“The Let Alliance Nil Deposit Scheme presents a very different offering to other schemes currently on the market as we replicate the terms and conditions of the current cash deposits registered in the official schemes.

“We are excited to bring this to market, and believe it will provide agents with a comprehensive protection package that will bolster their offer to both landlords and tenants.”

Meanwhile, another zero-deposit provider, InsureStreet, has revealed it is in talks with the Government-backed deposit schemes to provide adjudication services and is also speaking to agents about launching pilots as it seeks to grow the business.

Tahir Farooqui, founder of InsureStreet, told EYE: “We want people to be comfortable with what is going on, and linking with a deposit scheme would provide the confines that tenants already know really well.”