Cash deposits: why do I pay & where does it go?

Written by
Tahir Farooqui
CEO
Renters
April 11, 2018

Renting is generally a much cheaper alternative to buying, especially when you consider that a first-time buyer needs an average deposit of £51,821* to secure a home. Renting requires a more modest amount to get started, but it’s still a substantial sum that not every tenant can afford. Tenants in England and Wales have to muster an average deposit of almost £1,000, according to the Deposit Protection Service (DPS). Add in moving costs, administration/reservation fees alongside the likelihood you’ll be forking out for furniture and it soon mounts up.

With such a down payment involved, knowing why you pay a deposit may give you a sense of justification when you transfer over your hard-earned cash. We all know that a deposit needs to be paid but where does your rental deposit actually go? Thankfully it isn’t stuffed under someone’s mattress. Your Landlord or Agent is obliged to protect your deposit in a Government-approved scheme within 14 days of receipt. This protects your cash from misappropriation and provides you with a redress scheme should your deposit be withheld unfairly.

If you’re thinking that the deposit process is a bit costly and convoluted, we agree. That’s why we set up Canopy – to provide Renters with a cheaper, more streamlined way of renting a property. We’re replacing the traditional cash deposit with an insurance policy that costs a fraction of the current demand, working out at a UK average of £100 per tenancy. This cost is for a singular property so it can be split among all the tenants living together for added affordability. Deposit-free renting with Canopy puts cash back in your pocket when you need it most – to pay for removal costs, a new sofa or even that holiday you’ve been dreaming of.

We also believe that something as simple as paying your rent on time should be rewarded. With Canopy’s RentPassportTM, prompt rental payments will count towards your Experian Credit Report, giving you access to preferential insurance products and speeding up the tenant referencing process for the future, so you can move in and get on with life.

*Figures from mortgage broker L&C Mortgages