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England

Zero deposit companies

Your landlord or agent might suggest a 'zero deposit option' instead of paying a deposit.

A zero deposit option is a guarantee or insurance from a private company. Some agents get commission from these companies.

Each company has different terms and conditions.

Always:

  • read the agreement carefully

  • get advice if you are unsure about anything

  • choose a company that is authorised by the Financial Conduct Authority (FCA)

You can check the FCA register. You can report a company that is not authorised but should be.

How zero deposit companies work

You do not have to pay a deposit up front. But you could end up paying more in the longer term, especially if there are problems at the end of your tenancy.

Usually you pay either a:

  • monthly premium

  • non refundable fee at the start of the tenancy

The landlord can make a claim if they want to charge you for things like cleaning, damage or rent arrears when your tenancy ends.

If the company pays the landlord's claim, they will reclaim the money from you. They could take you to court if you do not pay.

If an agent forces you to use a zero deposit company

An agent cannot force you to use a zero deposit company. They can only offer it as an alternative to paying a deposit.

If you are forced to pay, it could be a banned fee.

You can complain to a redress scheme if your letting agent:

  • told you that you must use a zero deposit company

  • did not explain you would still have to pay for anything normally covered by a deposit

Disputes at the end of the tenancy

Ask the company:

  • for their dispute resolutions policy

  • if they've signed up to an independent dispute resolution service

You may have to pay a fee if the company decides the landlord is right, or if they think you raised a dispute without a good reason. 

You can complain to the Financial Ombudsman Service if the policy is in your name.


Last updated: 21 May 2024

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