Zero deposit companies

Some landlords or agents may suggest deposit replacement insurance or guarantee through a private company.

This is sometimes called a zero deposit option.

Some agents get commission from these companies.

You could pay less up front than with a normal tenancy deposit. But you could end up paying more overall, especially if there are problems at the end of your tenancy.

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)

Companies that are FCA authorised often say it on their website. You can check the FCA register. You can report a company that is not authorised but should be.

You could get help with a deposit from the council or a charity instead of using a private company.

How zero deposit schemes work

Usually you pay either a:

  • monthly premium

  • non refundable fee at the start of the tenancy

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

The company will pay the landlord and then ask you for the money. They could take you to court if you do not pay.

If an agent forces you to use a zero deposit scheme

You cannot be forced to pay for deposit replacement insurance. The landlord 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 scheme

  • 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 escalate your complaint to the Financial Ombudsman Service if the policy is in your name.

Last updated: 10 July 2022

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