The Nil Deposit Scheme (also known as a Deposit Replacement Scheme) has been available to tenants for a number of years. Instead of paying what can sometimes be a large deposit which is held in a Government Approved Deposit Scheme, the Tenant purchases an Insurance Warranty at a much smaller cost which then covers the Landlord for an end of tenancy claim in exactly the same way as a traditional deposit would do.
What are the advantages for a Landlord?
A traditional deposit is capped at a maximum of 5 weeks rent. The Nil Deposit Warranty will cover a Landlord for the equivalent of 8 weeks rent, a 60% increase in financial cover!
Landlords who offer the Nil Deposit Scheme option attract more enquiries for their property than those who only advertise the property with a traditional deposit being required.
The claims process is straight-forward and really no different to the traditional deposit schemes. Independent Adjudication is available in the case of a dispute to protect both parties.
There are no costs for the Landlord.
Should I be concerned about a Tenant's ability to pay the rent if they opt for using the Nil Deposit Scheme?
It is a requirement of the Scheme that all tenants are comprehensively referenced to prove their ability to pay the rent in exactly the same way as if they were using the traditional deposit scheme.
In our experience approximately 80% of tenants opt for the Nil Deposit Scheme, sometimes because they have deposits tied up in their current property, or they are looking to buy new furniture or appliances and the savings made by using the Nil Deposit option enable them to settle into their new home quickly and easily.
How much does it costs a Tenant?
The initial Warranty premium is equal to one week's rent regardless of the agreed fixed term period.
What happens at the end of the tenancy?
If the tenant renews the tenancy or stays at the property on a rolling tenancy, the warranty is renewed by the tenant.
If the tenant vacates the property the normal check out inspection is conducted and any dilapidation's discussed with the tenant, including any rent arrears. If the dilapidation are agreed, the tenant pays for those to be remedied. If they fail to pay, a claim is submitted to the Nil Deposit Scheme and if successful the insurer will pay out the costs and then look to recover them from the tenant.
If the tenant disputes the costs they have the option to take the claim to independent arbitration for which they pay a fee.
Please note the original insured amount does not change during the course of the tenancy, even if rent increases have been agreed.
Can I tell a tenant they have to use the Nil Deposit Scheme?
No. It can only be offered as an alternative to the traditional Deposit Scheme. The decision on which option to use rests entirely with the tenant.
Where can I find out more Information?
Our provider for the Nil Deposit Scheme is REPOSIT Further information can be found by clicking the button below.