Zero deposit schemes: what they cost and what they do not cover

How does it work?

You pay the provider a fee rather than giving your landlord a deposit. They give the landlord cover. At the end of the tenancy the landlord can make a claim for damage, cleaning or unpaid rent, and if the claim is valid you are asked to pay it. Most products have some kind of dispute process, and they are not all the same.

Do I get the fee back?

Usually not, and this is the whole difference. A cash deposit stays your money, protected in a government-approved scheme, and comes back to you at the end unless there are lawful deductions. The fee you pay a deposit replacement provider buys the guarantee. Leaving the place immaculate does not earn it back.

How deposit protection works on GOV.UK, and how to check whether yours is protected.

Can a landlord make me use one?

No. GOV.UK says a landlord cannot make you pay for a loan, pay for insurance or start a contract for a service as part of your tenancy, and it names deposit replacement products as an example of something you may choose but cannot be required to take. If it is offered, you must also be allowed to pay a conventional refundable deposit instead.

That cash deposit is capped at five weeks’ rent where the annual rent is under £50,000, or six weeks where it is between £50,000 and £100,000. An agent presenting the zero deposit option as the only one is describing a condition the law does not permit, and your council enforces it.

How does it compare with a normal deposit?

A cash deposit costs more to start and can come back. A replacement product costs less to start and does not. Over a long tenancy the second can work out dearer, because the fee is gone and renewal charges may apply on top.

Upfront cost

Cash deposit: usually up to five weeks’ rent. Replacement product: a smaller fee.

Returned at the end

Cash deposit: yes, less any lawful deductions. Replacement product: the fee, normally not.

Protection

Cash deposit: a government-approved scheme, with a free statutory dispute service. Replacement product: whatever the product terms provide.

If you damage something

Cash deposit: deducted from money already held. Replacement product: you can be pursued for it separately.

Ongoing cost

Cash deposit: none. Replacement product: renewal or administration fees are possible.

When might one actually suit me?

When the upfront cash is the thing stopping you moving, particularly if your current deposit is tied up until after you have had to pay the new one. Paying a smaller fee can be better than borrowing expensively to cover five weeks’ rent. Before you decide it is the only option, ask the council whether there is a deposit scheme or bond guarantee where you are moving: those are usually cheaper than both.

What should I ask before agreeing?

Get the full terms rather than the agent’s summary, and ask these before you pay anything. The answers vary between providers, and that variation is the product.

• Is any part of the payment refundable?
• Are there renewal, annual or administration fees, and when do they fall due?
• What is the most that can be claimed from me at the end?
• Who decides a disputed claim, and are they independent of the provider?
• Can an unpaid claim be passed to a debt collector or affect my credit file?
• What happens if I stay for three or four years?
• Can I pay a protected cash deposit instead, and what would it be?

Are zero deposit schemes a scam?

No. They are a real product doing a real thing, which is giving a landlord cover without the tenant finding five weeks’ rent. The problem is not dishonesty, it is that the product is often presented as a saving when it is a transfer: less now, nothing back later, and the same liability at the end. Read it as a purchase rather than a discount and you will judge it correctly.

Does it change what I should do at check-in?

Not at all, and if anything it matters more. With no deposit held, an end-of-tenancy claim starts as a demand for money you have not already paid. Dated photographs and a properly corrected inventory are what answer it.

The new tenancy checklist covers the inventory, the photographs and the meter readings at both ends of a tenancy.