A guide to deposit alternative products for tenants
Deposit alternative products, also known as deposit replacement products, are becoming
increasingly popular among landlords and tenants alike.
In light of the cost of living crisis, the products can provide a viable option for renters who would
rather pay one week’s rent as a non-refundable fee instead of having to lock away a lump sum
of up to five weeks rent.
Deposit alternative products were highlighted in the government’s ‘How to Rent’ guide as an
option for tenants which are fully compliant with the Tenant Fees Act, provided the tenant is
offered the choice of a cash deposit or a deposit alternative. The guide advises to check the
product’s terms and conditions to make sure it is regulated by the Financial Conduct Authority.
At (INSERT COMPANY NAME), our chosen provider is Reposit. We chose Reposit because we
believe it offers the most reliable cover for landlords and the best value for money for tenants. It
is independently authorised by the FCA, which ensures it is aligned with the advice outlined
within the How to Rent Guide.
(INSERT COMPANY NAME) is committed to ensuring a best in class service for our valued
tenants and landlord customers across (name city, town, village etc). To help end any confusion
or uncertainty around deposit alternative products, we have put together this
easy-to-understand guide to explain how the products work.
What is a deposit alternative product?
Cash deposits usually insist tenants provide five weeks rent but deposit alternative products
require a much smaller one-off fee, usually equivalent to one week’s rent.
(INSERT COMPANY NAME’s) deposit alternative provider Reposit requires tenants to pay one
week’s worth of rent as a non-refundable fee, up front at the start of their tenancy – instead of
paying a cash deposit. We believe offering our tenants a choice between this and a traditional
cash deposit gives them the flexibility to best manage their money and ensure they are in a
sound financial position when they move into a property. Reposit also offers its “Switch” product
which allows eligible tenants to get their cash deposit back during a tenancy and take a Reposit
out in its place.
Deposit alternative products should not be mistaken for tenant insurance because the tenant
remains fully liable at the end of their tenancy for any valid charges such as damage or rent
arrears.
What are the benefits for tenants?
The smaller outlay of one week’s rent means tenants can avoid borrowing money to fund their
cash deposit, save and invest it, or simply spend it on something they need. Saving and
investing allows tenants to benefit from a better return compared to locking their money away ina cash deposit scheme which does not pay interest. Many tenants would rather put their money
to better use right now, especially given inflation has reached in excess of 10%.
There’s a common misconception that tenants who can’t afford a deposit of five weeks rent,
can’t afford to take on a tenancy. However, a tenant’s capability to produce a lump sum of five
weeks rent is not a reliable indicator of their financial stability, or whether they can afford their
monthly rent on an ongoing basis. A survey commissioned by Reposit in early May 2023
found 30% of renters relied on overdrafts, credit cards, loans or borrowed from family
and friends to pay their deposits. A tenant’s financial capacity to pay the monthly rental cost
in full is best assessed by quality referencing and affordability checks carried out by specialist
providers.
By using a deposit alternative product, tenants avoid having to turn to lenders such as credit
card companies – which charge an average of 23% APR – or personal loans to fund a deposit of
five weeks rent and are therefore in a better financial position when moving into the property –
reducing the risk of rent arrears.
What happens if there is a dispute?
With a deposit alternative product, as with cash, the tenant remains fully liable at the end of their
tenancy for any valid charges such as damage or rent arrears. Also like cash deposits, tenants
have the option to accept or dispute them if an agreement cannot be reached.
In the case of a dispute, the case will undergo Alternative Dispute Resolution (ADR) where the
tenant will be required to pay a £60 dispute fee. This fee is refunded to the tenant if the charges
are reduced by the adjudicator. Another advantage of Reposit is that all formal disputes will
receive a final verdict from the adjudicator within just 14 days.
Visit Reposit for further information.
Disclaimer: This article is not financial advice. It is solely to provide insight into why
[INSERT COMPANY NAME] decided to offer a deposit alternative to our landlords and
tenants. Independent and professional advice should be taken before renting a property,
or buying financial products.
