Zero Deposit, the Zoopla-backed deposit replacement scheme, has announced an exclusive partnership with the National Landlords Association.
It has already announced a similar tie-up with the Residential Landlords Association.
Jon Notley, CEO of Zero Deposit, said: “Our exclusive partnership with the NLA gives its member landlords peace of mind.
“We are already working with more than 2,100 letting agency offices across the UK and have covered over 11,000 tenancies to date.
“Adding the NLA to our list of partners is an exciting next step for us as we continue to expand.”
Competitor flatfair has recently announced that it has been chosen by CBRE’s Residential UK lettings business to offer no-deposit lettings.
is it not obvious? if anyone who has skin in the game thinks about this and the risk to the agent down the line of miss-selling is large. You have an unhappy tenant who is told there will be deductions, they are even more unhappy when they learn that they still have to pay for the dilapidations despite paying out each month for a zero deposit. Its so easy for a tenant to make a formal complaint and the hassle involved and if they win the payout will be large if it was miss-sold in that persons situation, there is also the issue that is could now be an illegal fee charged to the tenant and imagine when Shelter get their claws into it all hell will break loose. For me as an owner of a letting agency this is just too much risk. Squeezing tiny amounts out of every fee structure you have will not end well for the agents especially when there in my eyes is such risk of it going belly up and being the next ppi.
charge a reasonble fee to the landlord, work hard and do a good job – with the big boys their fee structure is allready maxed out even before the tenant fee ban came in. Be interesting to see their end of year results.
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You’ve obviously not met with them because you have misunderstood how it works
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Dear seenitall,
Thanks for your comment. I don’t normally engage with the comments section (one never knows who one is talking to), but you have raised so many legitimate concerns I felt compelled to respond. Firstly, I started looking at deposit replacement with many of the same thoughts. I was worried it would be perceived as a sub-prime product and given the delay between the tenant purchasing the product, and the landlord claiming, there was a big risk that tenants would claim “I didn’t understand what I purchased” or “I thought I paid a deposit” or even “I thought I was insured” – all ingredients for a mis-selling scandal.
I think that only Zero Deposit has truly met these concerns for a number of reasons, but mainly because our product is an FCA regulated guarantee. I know a lot of people glaze over when regulation is mentioned, and many see it as a negative, but in the context of deposit replacement – and the issues you have raised – I believe it is essential, for the following reasons:
1. You have talked about skin in the game, and under our product the landlord can be sure the tenant still has this. As you point out, they are completely responsible as they would be under a cash deposit. This is also the biggest risk, as you have highlighted, with the tenant either not understanding this or claiming not to understand when they get to the end of the tenancy. As a regulated product, tenants have recourse to the Financial Ombudsman Service (FOS) if they feel they have been unfairly treated. If the FOS rules that they have been treated unfairly, they can rule against us (although by this point we will already have paid out to the landlord, so this is a risk on us rather than the agent or landlord). This means that all of our processes have to be clear and in no way misleading, and designed assuming that complaints will make it to the FOS. So, for example you will not generally see us using the word “insurance” in our marketing; the tenant has to acknowledge that they have understood the key features of the product, and we even put a block on our portal to stop the tenant purchasing the product if they give us information that suggests that the product may not be suitable for them (e.g. if they are planning on being in the property for a short period of time). We even named our product to avoid misunderstandings.
2. Agents are not able to “sell’ the product. We bring agents into our network either on an “information only” or “introducer” basis. This limits what agents can do when presenting the product to tenants, and we have systems and people in place to monitor and mystery shop our network. We have also declined some agents because we felt they brought too much risk to the wider network. The great thing about our product is that it is easy to understand and tenants either want it or they don’t. I have seen evidence that some of our unregulated competitors use this feature against us, with some agents telling us that they are put off because they cannot “sell” our product. Well, if there ever was an ingredient for a mis-selling scandal, its a load of letting agents out in the market pushing deposit replacement on tenants. We control the actual sales process and we provide very clear marketing material for our partners and make the process very easy for everyone involved. All of this is put in place to avoid mis-selling.
We have brought a very large number of agents on already, and if you look at the top 50 letting agents (by number of offices) and those who are offering deposit replacement across their networks, overwhelmingly they are choosing to partner with Zero Deposit. Often this is because they have looked carefully at the various products and determined that ours comes with the best protection and safeguards for their landlords, tenants, and also for their own reputation.
Interestingly most agents are not offering deposit replacement just for the commission. That is a bonus but the real benefit of the product comes from the fact that offering it speeds up the rental process and makes properties more attractive to tenants. We have evidence that listing properties with the Zero Deposit Guarantee increases click throughs, and because tenants don’t have to find as much money to move in, they move in faster. This is much more valuable to an agent than a few quid in commission.
You have also mentioned concerns about whether delaps could be an illegal fee and we are very clear that this is not. We have had a significant number of claims already and we are seeing all of the scenarios that we expected – and more. The process is working well.
I hope that all makes sense & please get in touch if you’d like to find out more.
Regards,
Jon Notley
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Would be interested to know how many agents in your “network” are declaring the commission earned by introducing your product……. as the commission comes indirectly from the charge that you make to tenants, surely this may be deemed to be falling foul of the tenant fees act?
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Considering the majority of agents sell the 0 deposit schemes as an insurance the fall out when the FOS does decide to do something will be huge. Non of the agents I’ve seen advertising these schemes are declaring they get commission from them.
Whilst I agree a large upfront deposit can be difficult to get 0 deposit schemes in my opinion are not the way to go, as with most thing in society it will be the ones that can least afford it that will suffer. Good to see you have a sense of humour “Interestingly most agents are not offering deposit replacement just for the commission” its all about commission how else are agents going to replace that large hole left in their finances by the tenant fee ban, Landlord will only tolerate so much and hiking fees to compensate probably isn’t one of those things.
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Has anybody made any claims for damages against these Zero Deposit schemes? If so, how easy was the process?
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Yes, it was quick and easy. The best part on one of the cases was that once it was escalated to the Zero Deposit team, they actually negotiated with the tenant and got them to agree to pay the money!
It’s also made crystal clear to the tenants and ZD do all of that for you.
Tenants are actively seeking out these products and it’s not because they can’t afford a normal deposit, they want the flexibility and don’t want to be tying up 1000’s in deposits for what are now much longer tenancies.
If you have a flat to let in a block and your competitor has another in the same block offering Zero Deposit, who are they going to call? It won’t be Ghostbusters……
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Another false economy……is it really worth the £10/£15 commission? There’s going to be a lot of unhappy landlords…..cash is king folks!
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yes, cash is king in the pocket of the tenant.
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Its just another dodgy scheme from insurance companies dipping in to our business like ravishingly cling ons, same as tenant referencing agents, stop using them and do the job yourself.
The best method is to take the max deposit x5 weeks and first month rent in advance, if the tenants can’t afford that then they can’t afford the property, decline and move on.. forget the minuscule introduction fee, stop trying to make up for the lost tenant fees, now tenants don’t have to pay fees they can surely afford the deposit. Stop complicating things for the sake of a couple of quid
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Hit Man – the most sensible thing I’ve heard all week. Both NLA and RLA doing their member a serious mis-service with this.
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Thanks George, I usually say what I mean, unfortunately some don’t like truthfulness. Too many paracites like drug dealers using agents to sell their goods
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