Minister warns letting agents over ‘zero deposit’ selling tactics

Housing Minister Felicity Buchan (pictured) has warned letting agents that they must not use zero deposit participation as a carrot to secure tenancies in reply to a question by Labour MP Catherine West.

She asked the Minister what recent discussions the Government has had with the property industry on the use of such products.

Buchan warned agents that “under the Tenant Fees Act 2019, letting agents cannot require tenants to meet any conditions that could only be met by paying a fee for a third-party service including requiring the tenant to use a deposit replacement product”.

But the Government is not against the schemes, she said, highlighting that “alternative products can offer flexibility and remove barriers to securing a tenancy for tenants who would otherwise struggle to fund an upfront cash deposit”.

Under review

Nevertheless, Buchan warned that her department was keeping the impact and risks of deposit alternatives under review, including their “affordability, accessibility, and the way they are sold”.

The question from West coincides with an investigation by The Observer last weekend, within which allegations were made that some agents had allegedly forced tenants to sign up to zero-deposit insurance schemes to secure properties.

This led Sam Reynolds, chief executive of Zero Deposit, to say that: “We are at the point where enough is enough. We are calling for a code of conduct across deposit alternatives that makes FCA regulation and consumer protections mandatory”.

Free choice

In response to the Minister’s comment in parliament, Ben Grech (pictured) of Reposit told The Negotiator: “The guidance from the Government about deposit alternative products has been very clear from the word go; that tenants must be presented the free choice between a cash deposit or a deposit alternative.

“Reposit wholeheartedly supports this agenda of consumer choice. Deposit alternatives in general represent a valuable option for tenants who wish to use their money in a more optimal way – allowing them to keep hold of their money and pay for what they owe when they owe it.

“For landlords, it is a helpful way to receive more protection when needed without having to burden all tenants with higher upfront costs. “We welcome the attention that is currently being drawn to the sector and would invite further work from the relevant regulators to ensure that any product is properly regulated, independent and sold in a fully compliant manner.”

Nathan Emerson, CEO of Propertymark tells The Neg: “We recognise that there are barriers to gaining a property for low-income renters and our agents are keen to work with tenants and landlords to work out the best situation for all.

“However, agents should be aware of the potential risks involved in participating in deposit-free schemes and should look carefully at the protection offered and specifically, the consequences should their provider fail, and the potential for their landlords to no longer be protected.”