New insurance-based tenancy deposit schemes have divided landlords and tenants with regard to their effectiveness.
A number of schemes have recently been launched with the aim of resolving tenant’s difficulties in raising the cost of a deposit by instead offering a monthly insurance payment. New research conducted by letting agent Upad.co.uk revealed differing concerns from different parties in the buy to let sector. Landlords expressed fears that the insurance would not adequately cover them for repairing any damage at the end of a tenancy. In contrast, some tenants felt that with a standard deposit they would be more likely to get their money back, whilst a replacement insurance could lead to them making payments that would not be returned.
Overall, the study found that tenants were more in favour of insurance-based schemes than landlords. However, less than 10 per cent of either group were aware that such schemes existed.
For landlords, the schemes seemed somewhat unnecessary. 57 per cent said that they had never experienced a tenant struggle to raise a deposit. Just 35 per cent felt finding tenants would be easier through offering an insurance-based scheme over a deposit. Only 14 per cent felt that insurance was a better idea.
In contrast, 35 per cent of tenants favoured insurance over a deposit, although only 37 per cent said that they would definitely prefer to take part in such a scheme.
Portfolio landlord and Upad founder and CEO James Davis said: ‘Alternatives to paying one-off deposits are always welcome, and these schemes are a great idea. Immediately, tenants will be free of the struggle of having to raise a deposit for a new rental before they have got their existing deposit back, and those who are unable to raise a deposit at all, or have no means of borrowing the money, could find themselves able to rent a far wider range of properties than they previously could. I am definitely in favour of such schemes and hope in the coming months a greater proportion of landlords will also take this point of view.’