Are Deposit Alternatives Worth Accepting? The 8 Pros & Cons Of Accepting Deposit Alternatives!

Overview of the alternatives

You may have heard about deposit alternatives – these are known under many different phrases like – no deposit option, no deposit scheme, deposit replacement product, deposit-free renting, etc.

Read on to take a closer look at what those alternatives are, and whether it’s worth using them.

Let’s see how these can affect you and your tenant.

Who Provides These Deposit Alternatives?

There are plenty of providers of those deposit alternatives. One of the companies authorised for their deposit schemes by the government – MyDeposit provides deposit alternatives too – they call it a deposit replacement. Usually, the providers of those schemes are companies that are in the letting industry, the insurance industry, or agencies themselves.

The Cost And Who Covers It?

Most likely there is no additional cost for you, as a landlord.

Usually, the cost would be a % of the rent or a certain amount and a setup fee or a monthly fee to cover by a tenant.

Some providers are also charging renewal fees at the end of each year of the contract. Despite the fees paid for deposit alternatives, tenants will still be obligated to pay unpaid rent or any damages to the property at the end of the tenancy period.

End of tenancy

In case of a dispute, when using deposit alternatives, tenants may also be charged with extra costs on top of any charges, or even pay for arbitration services.

There is no extra cost for a landlord.

How is this legal?

My first thought was ‘hey, what happens when tenants pay a monthly fee for the duration of their contract and the amount, they paid is higher than 5 weeks’ deposit for the whole duration of the tenancy?’.

You might ask the same question too.

The way the deposit alternatives work is different from the deposit scheme. What the deposit alternatives provide is an insurance policy or a certificate of deposit.

That way the amount paid by the tenant does not have to be registered under one of the deposit schemes.

So, if the tenant does not pay a 4- or 5-week deposit, but pays a fee to a provider of deposit alternatives, it is not treated as a deposit payment.

The fee would be interchangeable for a third-party company service, not a deposit itself.

How would the deposit alternatives affect you?

Using deposit alternatives sounds tempting, especially since you might be able to get the tenant sooner.

But is it really such a good option?

Imagine you are about to move, and you know that you will need to pay the deposit and rent at the beginning of your new agreement, even before your deposit is returned to your current place.

So, before you move, you are more likely to put some money aside, knowing that there will be more expenses.

Now, if the applicant is not prepared to pay the deposit and rent at the beginning of the tenancy that could indicate issues further down the line.

It does sound better if the tenant just prefers those deposit alternatives to a traditional deposit and it is not a matter of not being able to afford it.

Domestic budget management is very important and rent payments should be prioritised.

Pros and cons of using deposit alternatives?


  • Faster process, as the fees upfront are smaller and covered by a tenant solely
  • Less paperwork for a landlord
  • Lesser void period
  • Attracts more applicants, and helps them to have two deposits locked at the same time
  • At the end of tenancy, some companies will be able to cover losses equivalent to even 6 or 8 weeks of rent.


  • Need to dispute with the company providing the deposit alternatives
  • Some agents might try to push that to get a commission from the service provider
  • Non – refundable for tenants and plenty of additional charges for tenants, so your relationship with a tenant might be affected

So Are Deposit Alternatives Worth My Attention?

This is a difficult decision to make. It is not always easy. Deposit alternatives seem tempting due to no cost for you as a landlord, or even potential commission and possibly higher pay for your losses at the end of the tenancy.

At the same time, it is worth keeping in mind that the quality of tenants who opt for those deposit alternatives might be lower. I also think it is important to keep a good relationship between you and a tenant, so if you decide that you would like to proceed with one of the alternatives, make sure the tenant is familiar with all costs, terms, and conditions.

In order to avoid any unwanted stress, the best idea is to contact us, and our team will be able to assist you.

When it comes to tenancy deposit alternatives, I am not the biggest fan, as it seems fairly new and lacks legal regulations.

However, you might have a different opinion and that’s OK. We will be happy to assist you, no matter what your decision is.