Everything You Need To Know About Deposit Replacement Schemes

Whether you are a tenant or a landlord, it’s essential to be in the know about all things rental.

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Deposit replacement schemes are becoming increasingly popular amongst renters and landlords all over the UK, but what are they and how do they work? 

If you’re curious about deposit replacement, then you’re in the right place, because we’ve covered everything you need to know about the deposit replacement schemes. 

What are deposit replacement schemes?

Deposit replacement schemes basically do what they say on the tin – they replace tenancy deposits. In general, they cost one week’s rent. However, instead of the tenant paying the landlord, they pay the scheme provider, with the landlord then covering up to a certain cost, depending on the provider.

Benefits for tenants

A deposit replacement scheme can offer many benefits for tenants, such as making it easier for those who cannot afford to pay a large, upfront deposit to have better access to the rental market. Having the option to only pay one week’s rent, rather than the traditional five, allows more people to move into a new home.  

Deposit replacement schemes also offer cover for any damages the tenant makes to the property. This means that, as a tenant, you won’t have to pay upfront for damages and also will not have to worry about not having your deposit returned to you

Therefore, a deposit replacement scheme can also make the end of a tenancy easier to navigate. It tends to be easier to avoid disputes over a deposit if there wasn’t a deposit to start with! 

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Disadvantages for tenants

Deposit replacement schemes are sounding pretty good for tenants right about now. However, it is also important to be aware of the disadvantages of opting for a deposit replacement scheme. 

Some schemes will charge an annual renewal fee, with others charging monthly, which means you may end up actually paying more over time than with a traditional deposit. Be sure to check the small print of the scheme before committing to anything.

Benefits for landlords

As a landlord you know that registering your tenant’s deposit with a deposit protection scheme is part and parcel of your job. If you fail to do this correctly within 30 days, you can be fined.

If you don’t return it in time once the tenancy is over, you risk being taken to court. Stressful stuff. 

So, opting for a deposit replacement scheme is also pretty tempting for landlords. It eradicates all the fuss and bother of deposits, because there is no longer a deposit in the picture!

Deposit replacement schemes also tend to give you more cover against unpaid rent compared to a traditional deposit. 

Disadvantages for landlords

The other side of the coin is that some landlords worry that because a tenant has not directly paid anything for the property that they could lose, i.e. a deposit, they may be more careless with the property. 

In other words, a tenant may not be so inclined to keep the property in a good condition if they don’t have anything to lose. However, this can be solved by making it clear to tenants that if damages are made to the property, they may still be held accountable to pay.

As a tenant or a landlord, it’s vital that you are fully informed about deposit replacement schemes before you opt for one. It’s also important to note that a tenant must be offered both options (traditional deposit and deposit replacement scheme), and cannot be asked to pick either one. While they offer many benefits to both parties, there are ways in which you may prefer a traditional option. Ensure you read the small print! 


Deposit replacement schemes essentially help tenants move into their new home without impacting their pocket while also providing landlords with the same guarantees as traditional options.

Learn more about deposit replacements with Mashroom

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