The cost of moving home has never been higher for tenants. In fact, according to research from MoneySuperMarket.com, the average renter spends almost £3,500 in 'extra' moving costs across their lifetime. This could include costs for things like removal vans, storage, cleaning fees and buying household items.
These costs, however, do not include security deposits. Traditionally the most significant outlay for tenants when they move home, deposits can put renters in a tricky financial situation when they come to move between rental properties, largely because they often don't get their existing deposit back before they have to find the cash for their next one.
There is also the high cost of security deposits to consider. They are now capped at five weeks’ rent for annual rentals under £50,000 and six weeks’ rent for rentals over £50,000 a year. Despite this measure, the average cost of a deposit is still high, with the Deposit Protection Service (DPS) calculating it at £1,110 in 2018.
Due to these high costs, in recent years a number of rental market providers have launched deposit-free solutions, which allow renters to pay just a small fee – usually equivalent to around one week’s rent, covering them for the duration of their tenancy.
How does deposit-free renting work?
Instead of having to find a five- or six-week deposit alongside your first month's rent, going down the deposit-free route means you'll only be required to pay a small one-off insurance fee. Your insurance fee is likely to be equivalent to around one week's rent (approx. £250), compared to a refundable deposit which is likely to cost over £1,000.
The deposit-free agreement is an insurance policy which means you are responsible for damage or loss to your landlord's property, removing your possessions at the end of the tenancy, any unpaid rent and the cost of reconnecting utilities if you do not pay bills. You will be required to pay the one-off fee on or before the day the tenancy starts and it will cover you for the duration of the tenancy agreement.
At the end of your contract, the landlord can pursue the insurance company for any costs they have incurred for damage or lost items. The insurance company will then require you to meet these costs.
If you want to dispute the claims made by the landlord, most deposit-free options allow you to use an alternative dispute resolution (ADR) service with one of the tenancy deposit protection schemes - the same process used for traditional tenancies.
More landlords and letting agents are providing renters with the option to rent a property deposit-free and some solutions, like Canopy, allow you to build a renter profile even if your landlord or agent does not currently offer deposit-free renting.
What are the benefits of deposit-free renting for tenants?
The main benefit of deposit-free renting is that it's cheaper and puts less pressure on your finances when you move home. This arrangement provides you and your landlord with the same level of protection as a traditional deposit, so both sides of the rental transaction can have the peace of mind they desire.
If you do have an issue with the costs you are required to pay at the end of the tenancy, it's highly likely you'll have access to an independent dispute resolution service through a tenancy deposit protection scheme.
You'll also have more freedom and flexibility than ever before. It will be easier to move frequently between rental properties, with less money to find and a quicker referencing and pre-tenancy process.
The additional money you save could be put towards a deposit for a future property purchase, used for a holiday or to buy furniture for your rental property - the choice is yours, that's the beauty of deposit-free renting.
What solutions does Canopy offer renters?
Our DepositFree insurance replaces your traditional cash deposit and allows you to rent more quickly with less pressure on your finances. Our solution makes your rent work harder and frees up your cash so you can spend it however you wish.
You will pay a small one-off fee to insure your tenancy. This means that in the event of any damage or lost items, the insurer will pay in the first instance and then you will be liable to meet the costs with the insurer.
It's important that you are happy with the inventory before you sign the tenancy agreement and take out the DepositFree insurance. In the event that there is any damage or lost items during the tenancy, you can do your best to rectify these issues yourself. And, by being transparent with your landlord, you can keep any insurance costs required at the end of the tenancy to a minimum. You can see our full insurance policy details here.
Sometimes waiting for references to be completed can delay your move and potentially provide competing tenants with an advantage. Our RentPassport allows you to be pre-referenced by building an online profile that prospective letting agents and landlords can view.
The RentPassport then comes with you when you decide to make your next move. This means no more paperwork and a quicker moving process with less of a financial burden. What's more, all the rent you've been paying and tracking will be building up your Experian credit score - something which could be hugely important to you in the future.