Media accuse agents of mis-selling deposit alternative schemes

The Observer newspaper has investigated the way letting agents apply so-called zero deposit schemes - and claims that in some cases agencies are flouting the tenant fees ban.

The newspaper says it has “uncovered evidence of pressure-selling tactics by some agencies in England, including cases where people were told they were required to sign up as a condition of securing a tenancy.”

One case study cited in the Observer article over the weekend was a couple - Travis and Hannah - who claimed they were “forced” to enrol in a zero deposit scheme after applying to rent a house in Cornwall. 

They are reported to have paid a £225 non-refundable joining fee for such a scheme, having originally asked to instead pay a traditional larger deposit which would then have gone into an approved deposit scheme. 

An email from an unnamed agent, sent to the applicants, said: “If that is something that will be a deal breaker for you, the landlord would more than likely look to the next applicant who would be willing to go down the zero deposit route.”

The Observer’s article quotes James Munro, head of the National Trading Standards Estate and Letting Agent Team, as saying: “Often it’s the agent who is the one in the middle really pushing these schemes and a lot of the time it’s driven by referrals.” 

And a spokesperson for The Property Ombudsman says that, while TPO cannot handle complaints directly about zero deposit schemes: “Where a tenant is forced to enter into a Xero deposit arrangement, this may be a breach of the Tenant Fees Act 2019.”

The newspaper article does not name any specific zero deposit scheme nor does it quote any response from a provider.

Letting Agent Today has asked two prominent zero deposit companies for their views on the article.

We have received a response from one - flatfair - which says: “Allegations of pressure selling are concerning and we would condemn any such instances. flatfair’s business model is guided by the principle of maximising choice for consumers, and ensuring a fair and transparent process for everyone. 

“We have sold several tens of thousands of No Deposit products to happy customers and we are only aware of a few cases where the product was not offered as a choice.”

Flatfair continues: “We are clear with our partners that flatfair’s products need to be offered alongside traditional deposit schemes. Whether landlords indicating a preference is a breach of the rules on tenant fees is a separate legal question but it is certainly against our business practices and ethics - our agents are trained to ensure that flatfair is not a condition of the tenancy and should not influence a tenants ability to rent a property, quite the opposite.

“We also have a number of robust processes in place to ensure that our No Deposit product is always offered as a choice for tenants. Whilst we are unable to mandate how agents market or promote our products, we insist that our deposit alternative is offered as a choice, in line with existing regulations, and provide regular training and marketing materials to support this. 

“If we are made aware of any tenants who indicate that they were not offered a choice, we work with our partners to ensure the tenant can switch to a cash deposit, receiving a full refund once a traditional deposit is in place.”

You can see The Observer piece here.