Page 25 - The Negotiator Mag 52pp

If a tenant can stump up the cash for a deposit, then they must be solid, credit- worthy clients – and anyone looking for a deposit replacement alternative could be risky. So goes the traditional way of
thinking by many agents and landlords. But is it true, or is this an outdated way of looking at things? As the average rent soars ever higher, the cost-of-living crisis could prove to be the catalyst for a shift towards deposit alternatives.
That’s the view of Gary Wright, co-CEO of Flatfair, which was set up in 2017 in an attempt tobreakthemouldofthetraditionalmodel, which requires a prospective tenant to stump up five weeks’ rent as a deposit – in addition to their first month’s rent. Wright thinks it’s a big ask when the average rent is now around £1,300 per month. Add to that the fallout
from Russia’s invasion of Ukraine, with the average family’s fuel bill set to rise to more than £3,000 a year, and you have all the makings of a rental crisis on your hands.
Inflation is a factor
“We’re a long way off the writing being on the wall for traditional deposits, but we are moving towards the realisation that tenants should be given that choice and not be forced down the cash route when money could be tight and money could be employed in more appropriate
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TN0822_25-28 Feature Deposits glfin.indd 1
If you’re locking up your money for two or three years you only get back what you put in, so in reality, with inflation, you are actuallylosingmoneyhaving
it sit there in an account.
Gary Wright Co-CEO, Flatfair
ways,” he says. “Obviously if you’re locking up your money for two or three years you only get back what you put in, so in reality with inflation you are actually losing money having it sit there in an account. So the differential is moving towards cash alternatives all the time.”
He believes there is a deep-rooted misconception that by offering a deposit alternative that the tenant isn’t potentially as good. “That’s been wrong from the start, and most alternative providers who’ve been around for five or six years know it’s wrong,” he states. “A tenant buying deposit alternative
like ours are at least of the level if not a better standard of tenant than is often opting for
a cash deposit.
“There are a lot of traditional old-fashioned landlords who have grown up taking cash and still think cash is king, but in reality it’s one of those myths we need to debunk.”
He points out that landlords don’t see where the money for a traditional deposit comes from. “Someone may have got it from beg borrowing or stealing behind the scenes, it doesn’t make them robust, it just means they’vegotaccesstomoneyfromsomewhere”.
“Not having the money is not an indication that you are going to trash the property and not pay. In most cases we know tenants would have the money, they are just choosing not
to use it. They can now use that £1,000 to buy the sofa they need, instead.”
Wright says industry’s challenge is making deposit alternatives available to everyone.
“At the moment my focus is on the 85 per cent of tenants who do not get given that choice. That’s wrong, and in America it is now
being mandated by state that they have to
do that.”
Though not technically insurance (it holds its own pot of cash, which is reinsured), Flatfair protects up to 10 weeks’ worth of debt for a one-off fee equivalent to one week’s rent.
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The deposit dilemma
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The cost-of-living crisis is likely to accelerate the move towards deposit-replacement schemes. Richard Reed looks at some of the options on offer.