Renters won’t have to pay deposits with new tenancy scheme

RENTERS won’t have to pay a deposit to get a new home under a new tenancy scheme that has been launched this week – but there are some fees to watch out for.

Landlords often require you to put down a deposit for a house, which can often be hundreds or thousands of pounds and difficult to save up for.

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On average, renters have to put down a £1,054 deposit to secure a tenancy, according to the Office for National Statistics.

We explain a new scheme which says you can avoid paying this sum up front – but here’s what you need to know about the fees in place.

How does the scheme work?

It is illegal for your landlord to ask you to pay a deposit of more than five weeks’ rent.

So if you were paying £500 a month in rent, you shouldn’t be paying more than £625 for a deposit.

But Housing Hand, a rent guarantor, has launched a scheme where working professionals and students can move into a property without coughing up for deposit.

You will have to pay a £25 joining fee and and a one-off payment for the scheme.

The one-off charge is equivalent of 20% of one month’s rent to Housing Hand which is paid in monthly instalments stretched across the length of the tenancy.

For example if you paid £500 rent a month for 12 months, you would need to pay £100 over one year – which works out at roughly £8.33 a month, plus the £25 fee up-front.

Are there any other catches?

There’s no guarantee that your landlord will agree to waiving your deposit and accepting Housing Hand as a rent guarantor.

That would mean you would have to hunt for another landlord who would agree to sign up to the scheme.

You also need to provide personal information in your application, such as proof of identity, proof of address, and evidence that you earn at least 1.5 times your share of the monthly rent if you are a working professional and not a student.

Housing Hand says using the scheme will not affect your credit score, as it does not do a hard check on your file.

However, if you miss your rent payment and Housing Hand has to pay the rent on your behalf, you will be required to pay the money back.

Unlike a deposit, which you get back once you move out, you won’t receive the fee that you’ve paid to Housing Hand.

Housing Hand is not the only company offering a scheme where you don’t have to pay a large deposit up front.

Zero Deposit for example offers a service where you don’t have to pay a deposit upfront, bit one week’s rent and a £49 set up fee – plus a £17.50 fee per year.

However, experts have warned renters about using schemes offering you to move in without a deposit.

Generation Rent deputy director Dan Wilson Craw said: “Renters should be careful about using schemes like this as they are not regulated and ultimately cost more than traditional deposit schemes as they aren’t refundable.

“We have heard from tenants who have used other deposit-free schemes and found that after paying for the coverage every month, they move out and are hit by a large claim for any damage or wear and tear that is very difficult to challenge.”

Industry watchdog The Property Ombudsman also told The Sun that it was concerned landlords and letting agents were pushing deposit-free schemes on tenants in 2020.

It said renters would be mis-sold “too good to be true” schemes and then charged non-refundable fees.

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This post first appeared on thesun.co.uk