A BBC investigation suggests some agents may be mis-selling deposit alternative schemes.
Tenants are then hit by what the probe says are hidden costs which were not explained to them at the outset.
The BBC story looks at a tenant called Simon who rented through an agent using a deposit alternative.
“The 23-year-old was keen to move out of his family home to live with his partner – but they didn’t have enough for the deposit of more than £1,000 to rent in Sussex. Eager to move quickly, the couple decided to rent through an agency which offered a deposit-free option.
“It wasn’t until they had already put money down and were going through the paperwork that they realised the monthly fee to rent without a deposit was money they would never get back.
“Simon has been living there for more than a year – and has paid more than £500 in fees so far. He feels the agency did not highlight the fee was non-refundable.”
The story then cites The Property Ombudsman, Katrina Sporle.
She says one of her cases has involved a tenant was forced to pay an administration fee to switch to a traditional deposit – even though they said they had not understood the terms of the deposit-free option. Others were told they had to use a deposit-free scheme to rent with an agency.
David Cox, chief executive of ARLA Propertymark, says it welcomes anything which helps renters struggling to pay a new deposit before they get their previous one back.
However, he says, it is important tenants understand fees for deposit-free schemes are generally non-refundable.
Almost inevitably, campaign group Generation Rent has criticised agents too.
In the BBC story the organisation says some tenants feel under pressure to accept a deposit-free option in a competitive renting market; with at least eight products on the market, tenants can easily be confused while the group accuses some agents of charging tenants as much as £100 to dispute a damage claim from their landlord – a fee which does not exist for traditional deposits held in a government-backed scheme.
Former ARLA president Peter Savage – now an industry spokesperson for deposit alternative supplier Zero Deposits – responded to the BBC probe by saying:
“We have been emphasising the importance of Financial Conduct Authority regulation since we launched in 2018. We are deeply concerned that unregulated products can be sold freely and aggressively to tenants and this will lead to more complaints and adverse publicity, damaging the reputation of agents in the process.”
He continues: “We urge agents and landlords to act responsibly and choose to partner with only FCA regulated deposit replacement products, along with their associated protections and safeguards.”
You can see the BBC story here.