Pros and Cons of Zero-Deposit Schemes

Tenants - novum property solutions

Moving into a rented home can be an expensive venture. Especially, if you are moving form one property to another. You find yourself caught in the situation where you have to pay a deposit for your new home, but you haven’t yet received a refund of the deposit for your current home. A landlord can ask for up to 5 weeks’ worth of rent upfront. This coupled with the first month’s rent can add up to a few thousands of pounds. Moreover, it all must be paid before you even get your keys.This is when a zero-deposit scheme comes in handy.

For many tenants, deposit amounts are simply out of their financial capability. This means some people will have a nightmare trying to find a new home.

However, there is a way to avoid the whole deposit ordeal. If you are ready to part with a week’s worth of your rent, you can try to apply for a zero-deposit scheme.

What is a Zero-Deposit Scheme?

Essentially, the scheme is an insurance policy. A tenant pays, typically, a week’s worth of rent. They also agree to pay for any damages they may cause to the property, and any financial loss due to the landlord. However, the fee is non-refundable. If a claim needs to be made, the insurance company will pay out to the landlord up to the value of 5-weeks rent. Consequently, if you use a zero-deposit scheme it reduces the initial cost of moving significantly.

What’s in it for the Landlord?

Landlords still get their usual protection, just like in the case of a traditional deposit protection scheme. However, allowing a zero-deposit scheme brings to the table more potential tenants to choose form. This can also translate into shorter void periods.

Disadvantages of Zero Deposit Schemes

Not everyone qualifies for a zero-deposit tenancy. There are a series of checks that a tenant needs to pass before they can be accepted. Additionally, not all properties can be rented under a scheme and they are always subject to landlord approval.

Most importantly, the tenant needs to be ready to lose their one week’s worth of rent forever. This is the price they pay. As opposed to the traditional deposit scheme where the tenant gets most, if not all, of their deposit back at the end of their tenancy.

However, if there is a dispute both landlord and tenant are left at the mercy of the scheme provider’s terms and conditions, which can potentially bring extra costs.


If you are looking for a new home but you simply do not have the cash needed, a zero-deposit scheme is the way forward. You may also want to keep your money for a rainy day and so you may not want to lock it in for the duration of your tenancy without any access to it or any interest earned on it. However, if you decide to go for a scheme, you will lose your one week’s rent. This means that in the long run, especially if you move a few times, using a scheme can be costly.

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