Theres a lot of plusses for landlords in using a No-Deposit Scheme. Heres my experience

There are various no-deposit scheme advantages which I believe make them ideal for landlords to offer their tenants. The scheme offered by Flatfair is my favourite (other schemes are available), and on one of my own lettings it recently gave me a great result with much better protection than I would ever have got from a standard deposit.

First, full-disclosure: Northwood Leicester offers the no-deposit option to tenants, and the agency makes a small commission on each Flatfair No Deposit (as it is snappily named) taken up by a tenant. But I used this scheme myself on a flat I rented to a (seemingly) good quality tenant, and when that tenancy went wrong I was handsomely protected and delighted with the result.

So I’m passing on this personal experience: I found valuable no-deposit scheme advantages and I want to give this recommendation based on an experience close to home.

A Deposit Gives You Protection Anyway, Doesn’t It?

As all landlords will know, since April 2007 it has been mandatory for any deposit taken by a landlord to be lodged with a deposit protection scheme. And in the Tenant Fees Act that came into force on 1st June 2019 the upper limit on the amount that can be taken is set at five weeks’ rent, for both new and renewed tenancies.

That’s fine if your property is looked after and your tenant pays the rent, as we all hope will be the case. It’s not so fine if your tenant does a runner owing even just one months’ rent – leaving just a week “in the kitty” – and it’s very much not fine at all if said tenant has also left a pretty awful mess in the property that you can only just access by shoving the front door hard to batter a path through the mountain of debt collection agency letters.

Frankly I was thankful the tenant in my case left with only just over two months’ arrears, for which an awful lot of chasing had been occurring in a very short period of time. Remember too that a tenant has to be in arrears for two months before you can commence a Section 8 recovery process. I wasn’t hugely surprised to get his e-mail saying there’s no point in pursuing him as he was now in Germany and full of the woes of the world, crucially including no money to his name. Any landlord who has had the merry prospect of chasing down rent arrears via a Money Claim Online or a Section 8 through the Courts will know it’s a forlorn exercise if the tenant simply has not got the money. You’ll waste a lot of time and money trying to secure justice, i.e. to recover what is rightfully yours, your rent.

So, in normal circumstances you fall back on the deposit (to which the tenant would have no defence in a case like this, so that would be one relief). But five weeks’ rent might not make much of a dent in the overall bill that includes repairs, redecoration, cleaning, and of course re-letting.

Are there no-deposit scheme advantages for landlords?

I found so. Put simply, the tenant is offered the option to take a Flatfair No Deposit instead of putting down a standard five-week’s rent deposit. The Flatfair option costs the tenant one week’s rent plus VAT – it costs the landlord nothing.

The landlord is then protected with up to ten week’s rent. This is described by Flatfair as “unpaid established charges up to a total value of 10 weeks’ rent (though never more than five weeks’ rent arrears)”. They promise payment within 10 days: that’s about right in my experience.

It is vital to understand that the tenant makes the choice: no agent nor landlord can interfere with the tenant’s preference. If it’s better in their circumstances to put down a deposit that they know they will get back at the end of a well-conducted tenancy, that’s fine. Because the Flatfair cost is one weeks’ rent plus VAT paid up front as a fee – it’s a cost of not having to find the five-week deposit alternative.

The attraction for the tenant is the cashflow advantage – because five weeks’ rent is a pretty significant sum – but also the immediacy. Usually a tenant is putting down five weeks on your property, while still waiting for their previous five weeks’ deposit to come back from their previous letting – if it’s not in dispute. So the reality of that might be that they are actually funding some further weeks’ of deposit if there’s deductions.

Of course, the difference is that they don’t get the fee back. They can weigh the plusses and minuses of that for themselves. Over the course of an average three-to-four year let that fee rather disappears, compared to the struggle at the outset to find the cash for a traditional deposit, but it’s the tenant’s choice. Here’s Flatfair’s website link for both landlords and tenants to know more about the detail.

Here’s How The Calculations Worked Out

So, I received the five weeks’ rent in full that the scheme offers, although of course the sum I was out from my esteemed tenant was nine and a half weeks’ rent. Then, in addition I got back all my cleaning, redecoration, lock change, and small damage costs, which could have been as much as another five weeks’ rent equivalent, but in fact fell slightly short of that. Altogether, I was paid considerably more than I would have got from the deposit alone, and (absolutely crucial to me) a whole lot less fruitless hassle chasing down the debt. For their sins, Flatfair take on that task and they have considerable resources at their disposal to do so – I think they earn their crust on that score.

Conclusions: This Experience = Satisfied Customer

It’s not necessarily for every landlord, and certainly isn’t right for every tenant situation. But it seems to me that with the rising cost of living, a No-Deposit option is a real and genuine benefit for a good many tenants who are having to find increasing sums to move-in to their new home. If so, as a landlord myself I found the very real no-deposit scheme advantages would make this a big benefit to other landlords.

Note: I repeat, Northwood Leicester sell the Flatfair scheme – we earn commission for it. Same as we do for insurance, i.e. for high-quality products that we earnestly believe offer a material benefit for our clients. The point of this article is to confirm that from personal and painful previous experience of how a letting can go wrong, I was delighted with the outcome when I used Flatfair. I’d welcome discussion if anyone wants to know more.