UPDATE: Alternative deposits chiefs clash over ‘lifetime deposits’ claims

A senior member of the rental deposits sector has taken competitors Zero Deposit and Ome to task following the former’s recent launch of a ‘lifetime deposit’ as a “marketing stunt that offers no fundamental innovation within the private rented sector”.

So says Ben Grech (pictured) who has been CEO of competitor Reposit since April 2020, although his claims have been strongly denied by competitor Zero Deposit (see below).

He claims that ‘lifetime deposit’ products from platforms like Zero Deposit and Ome, which both offer monthly payment models to enable tenants to afford the fees associated with their products, have yet to address what happens to the landlord’s cover if the tenant stops paying the fee.

“And if the cover continues, then why should the tenant keep paying,” he adds.

“Plus, who wants to have to pay a deposit for their lifetime, anyway?”

Both Zero Deposit and Ome have introduced monthly payment plans that enable a more portable, insurance-backed product to replace a traditional cash deposit, but that are more flexible than other deposit alternatives.

They are designed, like the Government’s proposed lifetime deposits scheme, to reduce the financial burden for tenants when renting a property and remove the need to pay both a cash deposit of five weeks’ rent plus one month’s rent down payment.

“My problem with commercially-available lifetime guarantee products is that although the monthly payments are lower, they continue for the lifetime of the tenancy which quickly makes them more expensive for tenants who stay for longer periods,” says Grech.

“Because of the costs that businesses like ZD incur when taking out one of these products, and the risk of the tenants not continuing to pay monthly, they are forced to implement a set-up fee.”

Response

Sam Reynolds of Zero Deposit (pictured) says, in response to Grech’s points about tenant costs, that: “Unfortunately, he simply hasn’t understood how Flex works.

“The upfront cost is lower than Reposit, that’s correct, but importantly the premium doesn’t last for the lifetime of the tenancy. The tenant will typically repay the premium within 12 months or sooner so they aren’t penalised for longer-lets. It’s actually the opposite, they will often get a better rate with their next property. Flex is simply a better deal for tenants.”

Turning to Grech’s point about coverage for landlords, Reynolds adds that: “The landlord is covered whether the tenant continues to pay for the Zero Deposit Guarantee or not. We have helped close to 100,000 tenants move with our product so we understand renter dynamics and underwriting performance. The landlord remains protected whether it’s the first or last day of the tenancy.

“This mirrors peers in the US such as Rhino who have successfully implemented monthly pricing and deposit switching. Given their considerable success, they were recently valued at close to $1bn, it’s a tried and tested approach.”

Innovation

And on Reposit’s claim that ‘lifetime deposit’ products are a ‘stunt’, Reynolds says: “One of the upsides of Lifetime Deposits is that it has encouraged innovation within the category, and not just with Flex. I fully welcome this.

“It’s quite incredible to describe this as a marketing stunt; we’ve invested considerably in Flex across the last 12 months and shaped the product through extensive independent research plus time interacting with external teams focussed on solving the Lifetime Deposits challenge. The product breaks the deposit loop for good and solves the affordability, control and lifetime deposit challenge. Sounds pretty innovative to me.

“Ultimately, Flex was created through insight from our partner agents and landlords as well as research across over 2,800 tenants, of which 75% would choose Zero Deposit versus a cash deposit with this addition. I’m most interested in these perspectives. It’s unavoidable that Flex improves the rental experience.”