You'll see there's a few lettings agents now who offer tenancies with 'no deposit'. This generally means that instead of a deposit, the tenants buys an insurance policy (costing say £10 per month) that's supposed to compensate the landlord in the event of problems with the tenancy. I get asked on repeated occasions whether this is a good thing?
My gut instinct was no, but we trialled 'no deposit' in Northampton about 18 months ago, at a time when it was really hard to find tenants. About 10 tenancies started in this way, and we had trouble with pretty much all of them. As such the trial stopped pretty quickly! There seemed to be 2 main issues:
- It attracted the wrong sort of tenant - the type of tenant that couldn't save a months rent and a months deposit to move in, and didn't have anyone who would lend it to them!
- When it came to the end of the tenancy, tenants didn't have to 'behave' to get their deposit back. What incentive was there to leave the house in a clean condition, or give the required notice period? Yes - in severe cases the insurer who had provided the policy would sue them 6 months later, but that didn't help us when we had a dirty property and an angry landlord.
As such now, every Belvoir tenant pays a deposit. It seems that most of the other decent agents have come to this view also. To be honest, in the 2010 market there's been no real reason to incentivise tenants as it's properties that have been at a premium. However some agents still trade with 'no deposit required' on their adverts, which always puzzles me! It may be they have found a way of making this work, but my gut instinct is that whilst this is probably a good deal for a tenant, it's in the
landlord's interests to take a formal cash deposit and register it correctly. As we're the
landlord's agent that's the course we should follow.
Richard.
