Competition and Markets Authority investigates deposit alternative schemes

The Competition and Markets Authority (CMA) has launched an investigation into schemes which offer an alternative to the standard government-backed tenancy deposit.

The CMA has promised new guidance on tenancy deposits so tenants, landlords and letting agents are clear on their rights and responsibilities. The authority says it has found “areas of concern” around the so-called “zero deposit” schemes.

Zero deposit – or deposit replacement – schemes are sold as a low-cost alternative to traditional government-backed guarantees. They typically come with a fee equal to a week’s rent while standard schemes involve a deposit of around five weeks’ rent. However, with zero deposit schemes, the fee is non-refundable and tenants are liable for damages to the property when they move out.

In an article last year, the Observer claimed some tenants are being required to sign up to such schemes in order to secure a tenancy. Citizens Advice has previously asked whether tenants understand the difference between deposit replacement and government-backed schemes.

The CMA will also investigate other practices in the rental sector including sham licences, unlawful discrimination and retirement housing fees. “These warrant further investigation and we stand ready to take enforcement action if needed,” said the authority.

Research by the CMA found some landlords unlawfully discriminate against tenants who receive of benefits, have children or pets, or have mental health issues or disabilities.

It added: “While many landlords and letting agents are providing a good service, initial engagement by the CMA heard many complaints raised by stakeholders suggesting that a significant minority are not complying with consumer protection law.

“To help letting agents understand their obligations, the CMA will update its guidance for lettings professionals.”

Read more about this story on the Letting Agent Today website.

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