Deposit/Bond – Paper Guarantees?

Deposit/Bond – Paper Guarantees?

15:25 PM, 12th November 2018, About 6 years ago 30

Text Size

I am hoping to create a Deposit Guarantee Scheme, “Choice Deposits”, whereby the prospective tenant would have the option of paying an extra amount of rent, instead of paying a deposit, and the landlord would pay that extra amount of rent charged to Choice Deposits in exchange for a paper bond (deposit guarantee). I think this would perhaps be in £500 increments, e.g. for every £500 deposit guarantee, the tenant pays an extra £15 pcm rent.

Benefits for tenants:
This would give tenants a choice whether to pay a cash deposit to the landlord, or pay extra rent (ongoing) as an alternative.
It may enable the tenant to use their money for furniture or other things, rather than it being held as a deposit.
It can also assist tenants to budget more effectively.
It also gives low income tenants access to tenancies that would otherwise be unavailable.

Benefits for landlords:
They can offer the property to a wider range of potential tenants, so may be able to let the property sooner and reduce their void periods.
They have the reassurance of a rent/damage guarantee.
They can negotiate between themselves and the tenant what amount of deposit guarantee they want, and what amount the tenant is willing to pay for.
There is no penalty or fines imposed for failing to protect a deposit, as there is no actual cash deposit, only extra rent charged, (it is the landlord that has the protection of the deposit guarantee).
It is cost neutral (free) to the landlord, as they add the cost on to the rent charged to the tenant (with the tenant’s consent).
It can work for any type of tenant, from DSS to high income professionals.
It can work for any amount of deposit required (in £500 increments), and it is not affected by the government plans to limit deposits to the equivalent of one month’s rent.
It enables landlords to have an extra level of deposit guarantee for tenants with pets.

The final details have not been fully worked out yet, but at this stage I would appreciate some feedback from landlords (and tenants), and perhaps also initial expressions of interest from landlords, so that I can further assess the viability of the deposit guarantee scheme.

Thank you.

Robert Mellors
Choice Housing Ltd


Share This Article


Comments

Dylan Morris

Become a Member

If you login or become a member you can view this members profile, comments, posts and send them messages!

Sign Up

23:47 PM, 13th November 2018, About 6 years ago

Reply to the comment left by Robert Mellors at 13/11/2018 - 23:44
Thanks Rob I understand now. Seems a good idea.

David Dorset

Become a Member

If you login or become a member you can view this members profile, comments, posts and send them messages!

Sign Up

10:27 AM, 14th November 2018, About 6 years ago

Reply to the comment left by AA at 12/11/2018 - 17:30
I would be very interested in a scheme like this. The current set up is not fit for purpose. The DPS recently awarded me £30.00 for a cigarette burn in the middle of the lounge carpet. I would prefer they sent me a card with a laughing monkey soundbite inside as this would have been less offensive.
Good luck with the scheme and yes if it can be worked out on the legalities then i am in!!!

Chris @ Possession Friend

Become a Member

If you login or become a member you can view this members profile, comments, posts and send them messages!

Sign Up

13:51 PM, 17th November 2018, About 6 years ago

Reply to the comment left by Robert Mellors at 12/11/2018 - 20:40
I've lost count of the number of landlords I've spoken with, that have trusted a tenant to pay a deposit by installments AFTER the Tenancy began and keys handed over. ( and guess what - they didn't pay )

Monty Bodkin

Become a Member

If you login or become a member you can view this members profile, comments, posts and send them messages!

Sign Up

16:55 PM, 17th November 2018, About 6 years ago

Sounds like you're re-inventing the wheel Rob, deposit insurance schemes have been around for some time.
Article about it here;
https://www.which.co.uk/news/2017/05/will-tenancy-insurance-replace-the-six-week-deposit/
How much tenants pay – between 5% and 15% of the deposit
I doubt they take on DSS tenants without a home owning guarantor though -unless at eye watering premiums to reflect the much higher risk.

-Wouldn't touch such a scheme myself, tenants need some skin in the game.

LordOf TheManor

Become a Member

If you login or become a member you can view this members profile, comments, posts and send them messages!

Sign Up

17:39 PM, 17th November 2018, About 6 years ago

Hmmmmm.......
My experience is that any deposit for delapidations is lost if there is a Possession hearing with rent arrears. The judge orders the deposit to be used towards the arrears and when you eventually get your property back, the landlord has got didly squat to offset the cost of clearing, cleaning and all the repairs. If this deposit money can't be 'ring fenced' for the use of delapidations only, I can't claim to be excited so far. One of the things I like about deposit replacement insurance is that this money is out of the reach of the Court. Combined with an RGI policy, a deposit replacement sheme (paid for by the tenant, of course) seems to me the best combination.

Lord

Robert M

Become a Member

If you login or become a member you can view this members profile, comments, posts and send them messages!

Sign Up

16:28 PM, 18th November 2018, About 6 years ago

Reply to the comment left by Monty Bodkin at 17/11/2018 - 16:55
Hi Monty

The which article sounds great, I thought, you are right, if someone else is already doing this then there is no point me trying to develop the idea, but when I tried to Google the company all I found was a Facebook page. The page was basically a collection of other online articles about deposit schemes around the world, particularly in the USA and Canada, with very little information about the company itself here in the UK. However, their Facebook page did give their website address, so I tried this, and it links to some drawings for people to print off and colour in!!!!!

Does this company actually exist? Does it trade? Does it actually have a deposit guarantee scheme? How can landlords find out more about their deposit guarantee scheme?

Monty Bodkin

Become a Member

If you login or become a member you can view this members profile, comments, posts and send them messages!

Sign Up

18:00 PM, 18th November 2018, About 6 years ago

Reply to the comment left by Robert Mellors at 18/11/2018 - 16:28
Dunno the answers to your questions Rob. As I said, I'm not interested in such schemes.
But when I last used letting agents 5+ years ago, many had flyers advertising them.
Suggest you talk to some letting agents before embarking on this enterprise as I'm sure it has been tried before, for non-DSS tenants.
(The council DSS 'guaranteed' deposit schemes I won't even bother wasting time discussing.)

Terry

Become a Member

If you login or become a member you can view this members profile, comments, posts and send them messages!

Sign Up

7:07 AM, 19th November 2018, About 6 years ago

Nice idea. Unfortunately the extra rent would mean additional gross profit. A tax liability payable by the landlord!

Robert M

Become a Member

If you login or become a member you can view this members profile, comments, posts and send them messages!

Sign Up

9:06 AM, 20th November 2018, About 6 years ago

Reply to the comment left by Terry Pearce at 19/11/2018 - 07:07
But it would be a legitimate business expenditure that could then be offset against the income (gross profit), and would therefore have no effect on the net profit on which you are taxed. It would therefore not affect the landlord's tax liability.

Robert M

Become a Member

If you login or become a member you can view this members profile, comments, posts and send them messages!

Sign Up

9:24 AM, 20th November 2018, About 6 years ago

Reply to the comment left by Monty Bodkin at 18/11/2018 - 18:00
Thanks Monty, but the idea was to be inclusive of higher risk tenants as well, which the current Rent Guarantee Insurance (RGI) policies do not cover.

In relation to speaking to letting agents before embarking on this, I agree with you, and was hoping that the posting on P118 would be a way of doing this and getting some feedback from them, but I think my post was somewhat overshadowed by Larry's call on Shelter to provide such a scheme (which of course won't happen), and now Generation Rent's call on the Government to provide such a scheme nationally (which again won't happen).

Just out of curiosity, you've said that you would not be interested in such a scheme, but if there was a way that you could have the protection of a paper bond (deposit guarantee) and it did not cost you anything, then why would you not want this??

Leave Comments

In order to post comments you will need to Sign In or Sign Up for a FREE Membership

or

Don't have an account? Sign Up

Landlord Automated Assistant Read More