A London-based property and financial technology start-up, Reposit, is aiming to offer an alternative to tenancy deposit protection.
The firm’s offering is said to be far cheaper for tenants, while offering agents referral fees, and is also described as offering a speedier way of settling claims for damages and cleaning.
Yesterday, it announced a seed investment of £400,000 from a range of angel investors and venture capital firms.
Reposit uses a secure online platform to provide tenants with a more affordable alternative to the usual six-week tenancy deposit.
Instead tenants pay a non-refundable fee of one week’s rent.
Reposit’s service then provides six weeks worth of cover to the landlord for damages, unpaid rent, cleaning costs and any other charges normally associated with deductions from a security deposit.
Any damage that is the equivalent value of up to six weeks of rent is settled by Reposit. Any balance over that amount must be settled by the tenant.
Tenants can opt for Reposit through their letting agent using e-signature and online payment at the time of signing their tenancy agreement in just three minutes, with the agents earning a commission for every Reposit sold.
The commission is said to be anywhere between £25 and £75.
Tenants remain wholly liable for damages caused and the Reposit system allows agents and landlords to communicate any charges to them, with Reposit allowing them to settle the balance instantly.
The company says it was inspired by the trust implicit across the sharing economy in companies such as Airbnb and Onefinestay, and felt that the same ideals could free up cash for responsible tenants.
Curran McKay, co-founder and CEO of Reposit, said: “For many renters, paying a six-week deposit in addition to a month’s rent in advance and agency fees is one of the largest financial outlays they’ll make.
“Yet almost all, 97%, of deposits are returned in full, only to be re-registered once a tenant moves again, and the system is an administrative burden for landlords and letting agents alike.
“At Reposit we believe there is a better way that can benefit everyone.
“We’re delighted to have the backing of key investors who share our vision for changing how people rent and we’ll use the investment to raise the awareness of Reposit, recruit more letting agents to offer our alternative and expand our value through more services in the coming months.”
What will be in the fine print ?
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In theory I like this concept – it makes the renting process more affordable for tenants but still offers the landlord the reassurance that they will have a route to reclaim financial costs at the end of the tenancy if necessary.
However, cynical as this might be, I can’t help thinking that tenants will take it for granted that the landlord has the equivalent of 6 weeks rent to use to correct any issues at the end of the tenancy with the tenant having very little financial risk. Are tenants really going to make as much effort to leave a property as they found it if there is no financial risk for them? The weeks rent that tenants pay at the start of the tenancy is non refundable anyway so why would they spend time and effort cleaning and maintaining gardens etc etc when they can just leave it up to the landlord at the end of the tenancy? Will it breed lazy and irresponsible tenants? ‘Almost 97% of deposits are returned in full’ – but surely the reason for that is the motivation of the tenants to want their money back. Take that motivation / risk away and I’m not sure the figures would be the same.
Leading on from this what is the process for landlords to make a claim? Is it similar to an insurance system where Reposit will assess a landlord’s ‘claim’ and make a decision on whether it is valid or not? In which case, how likely is it that a landlord will be successful and receive the funds they need to correct issues?
Not entirely sure it will work for the benefit of all involved. And if landlords don’t agree to it because they fee exposed, it’s a non starter anyway.
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Effecively a warranty scheme!! Currently £3.5 billion held in tenancy deposits, could a private company undewrite such risk? When underwriting risk there is a difference between a warranty and an insurance policy.
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Deposits are for the benefit of landlords, yet this article only talks about tenants and agents…
It is for landlords to decide whether this product suits then, and to pocket the commission.
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There have been similar schemes before, I was offered the chance to promote one and rejected it.
The key issue is that the tenant pays a non-refundable fee, but still remains liable for the cost of any damage. However, many tenants will not understand this. They will not understand that what they are buying is a warranty which protects the landlord, NOT themselves.
For those who remember Mortgage Indemnity Guarantees its a bit like that. The borrower bought a guarantee which would pay the lender any shortfall if the property was repossessed while in negative equity. However, borrowers thought this meant they could just hand the keys back and walk away, not realising that they were still on the hook. From their perspective the MIG they bought was worthless and the mortgage industry suffered a huge amount of bad press as a result.
Now onto this scheme. Imagine a tenant is chased for money for disputed damages at the end of a tenancy. He tries to exercise his right of independent arbitration through DPS / TDS, but finds he cannot, because no deposit has been paid. He tries to claim on the “policy” he bought, but only now discovers that (although the landlord has received his money) the scheme operator is still entitled to chase him for the money.
Then, he discovers the agent received a commission for selling him this “worthless” product.
That was why I rejected the scheme I was offered. If Reposit is fundamentally different then fine. If not then its not for me.
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that is how I see it Steve
a pointless product almost like a pay day loan in terms of %
if a tenant cannot afford the deposit upfront, then not really a good sign
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