Renting can prove to be an expensive experience, one that leaves your pockets feeling empty before you even get the keys to your new home. Fortunately, the tides are changing for renters, and the days of having to fork out extensive amounts of money could soon become a thing of the past.
The tenant fee ban is live and in effect, which means renters won’t need to pay any administration fees for renting a home. While the tenant fee ban has garnered its fair share of headlines, there’s something else going on in the background that potentially will excite renters just as much.
The Zero Deposit sees renters only paying one week’s rent as a security deposit (instead of the typical six weeks) and is a feature that landlords are becoming increasingly open to using.
But what it the Zero Deposit, you ask? Read on, and we’ll explain what it is, how it works, and why renters should be very excited.
The Pains of Security Deposits
One of the biggest bugbears of renting property comes in the form of the security deposit which is, on average, six week’s worth of rent upfront ( new rules will limit it to five from June).
Let’s paint a hypothetical picture here: under the current rules, if you agree to pay £300 a week in rent along with a five-week security deposit, you’ll relinquish £1,500 before even moving in. Coupled with the first month’s rent, it’s not uncommon to pay around £2,800 just to get the keys.
Yes, you do get the security deposit back once you leave the property (as long as there are no damages that you need to pay for). But with many tenancies now averaging three-years-plus, the money paid for a security deposit technically becomes dead money.
When you get it back, there is no interest earned, and with inflation, those initial lump sums suddenly don’t look so enticing. If you’re moving onto another rental property, the money is likely to end up going on another security deposit.
What is The Zero Deposit
Zero Deposit sees you renting a home without paying a hefty security deposit. Instead, you pay a non-refundable fee equating to one week’s rent. If you’re renting as a group, the fee is shared between all tenants.
The zero deposit acts as a guarantee for your landlord, and there is a yearly admin fee of £26 for anyone who stays in the property for longer than 12 months. Zerodeposit.com is perhaps the most well-known scheme, but there are several companies that renters can use.
It provides renters with a more affordable way of moving home. Coupled with the tenant fee ban, renters could literally save thousands of pounds when moving.
Hypothetical time again: that same place you rented for £300 a month will now cost you a total of £1,600 upfront with a zero deposit. £1,300 for the first month’s rent in advance, a £300 for zero deposit - that’s £1,200 saved.
Why is it Beneficial For Renters
The clear benefit for renters comes in the form of those lovely savings. If you’re saving around £1,200 with a zero deposit, plus another £500 on tenant fees, all of a sudden you have much more flexibility and room to manoeuvre.
If you’re moving into somewhere unfurnished, the money saved allows you the opportunity to spend it on swanky furniture. Or it could act as extra savings, which sit nicely in your bank or a savings account.
Perhaps, most importantly, it helps to avoid stress. As fun as moving into a new home can be, there is a fair amount of tension attached to it - any extra stress created from financial burdens is most certainly unwelcome - fortunately, those financial issues when moving look to be a thing of the past.
What About Landlords?
You’re most likely thinking, “what’s in it for landlords?” After all, you’re saving all that money, but what incentive is there for them to convert from a traditional security deposit to a zero deposit? Other than the fact that more than 50 percent of tenants favour rental properties with zero deposit, landlords don’t lose any of their rights.
The scheme’s protect landlords for six week’s worth of rent, and they don’t need to register anything and be tasked with the responsibility of looking after your money. If there is a dispute at the end of a tenancy, an official regulation body gets involved in determining who is liable - much in the same way as a regular security deposit.
A Fairer Way to Rent
If you’re looking for a rental property from June 1st, the landscape will be entirely different. For too long tenants were forced huge amounts upfront. Thankfully, with the zero deposit scheme and tenant fee ban, the paradigm is changing, and renters can now enjoy a cheaper and fairer way to rent a home.