For many of us, renting is our only option; and it’s a long-term reality.
With skyrocketing house prices and astronomical deposit costs, the dream of buying a place of our own may be out of reach unless you’re earning a hell of a lot of money, or you get a helping hand from mum and dad.
And, while renting can be beneficial and preferable for plenty of reasons, it also comes with its fair share of problems – not least the issue of scraping together a deposit.
A deposit of up to two months’ rent, plus letting fees, plus the first month’s rent, can add up to thousands.
Renters in London need to find an average deposit of £3,000 just to secure a lease for a property. In the most expensive boroughs that figure can rise to £8,000.
If that isn’t bad enough, you can find yourself in real trouble when moving between rented properties, as you’re often required to cough up for a new deposit before you get your old one back.
This can feel utterly hopeless because most of us don’t have a spare £3,000 lying around every time we move house.
Pile that on top of the fact that the average renter in London is already paying £1,665 per month on rent alone, it’s no wonder that this additional deposit cost is causing people to use credit cards or take out expensive loans.
For some, it’s causing a cycle of debt that can be almost impossible to break out of.
Carole is a teacher from Kent. The 53-year-old has found herself in a serious spiral of debt since getting divorced 11 years ago and being forced to put a rental deposit fee on her credit card in order to secure somewhere for her and her son to live.
Selling her marital home cleared her initial credit card debt, but when she began renting in 2018 her credit score plummeted leaving her in financial difficulty.
‘Although I have a very good income, the outgoings are huge,’ says Carole. ‘I have no savings and had to resort to credit to secure the flat as there are not many that are on the ground floor and accept pets.
‘Finances had always been hard, but finding a £1200 deposit knowing that I would struggle to pay it back felt awful. Paying interest rates on credit cards was my only option, and something I had never done in my life before. But I needed somewhere to live.’
Carole’s children are young adults now, but they still need her support, and making sure they are looked after as well as meeting her own monthly bills has been incredibly difficult.
‘The stress has been intolerable at times, and it has had an impact on my physical and mental health,’ explains Carole.
Things took a turn for the worse when her son needed more financial help. He had been living with his partner and new baby in his partner’s graddad’s council flat. They thought it would be passed to her as she had been the live-in carer for him before he died, but this was not the case and the young family was evicted.
‘We tried everything to get them a council flat but, in the end, they lived with me for three months in my one-bed flat. The baby was just seven months old when they moved in,’ explains Carole.
‘This was difficult for all of us and very stressful as I had to work full-time. The baby was sleeping in my room and my sleep was disturbed to the point sometimes I found it hard to function at work.
‘The only option, we were advised, was to get a private rental flat and claim housing benefit.
‘They had no money and no way of borrowing – they had no credit score yet. So what else can a mum and grandma do when there is a little baby involved?
‘I used my credit card with an interest rate of nearly 30 per cent, knowing full-well I could not pay it back interest-free.’
Carole put the deposit and the first month’s rent on her credit card – it came to more than £2,000.
‘I was scared and stressed but I felt I had no other choice,’ she says. ‘We asked about no deposit options, but nobody seemed to want to help
With the deposit for both her flat and her son’s flat put onto her credit cards within the space of a year, Carole now owes thousands and the interest is ever-growing. She says the worry affects every aspect of her life.
‘I have suffered from episodes of depression, although I try to keep upbeat,’ explains Carole. ‘I am sad that I have worked all my life – from 17 years old – and find myself in a position I never thought I would be in.
‘I am becoming quite reclusive as I don’t want to talk to people about my situation. I continue to support my son and grandson, but I look forward to a time in my life where I can be as close to “stress free” as possible, and never pay high interest on cards again.’
Carole puts her situation down to sheer desperation. She said she rushed to find the first suitable property because there was a baby involved, but if she could do it again she would take time to really assess her options.
‘My advice would be (for myself also) to never pay a huge deposit again,’ she says. ‘I would always try and find the no deposit option. As well as avoiding getting into debt, it also means no haggling or stress at the end of the tenancy trying to get your money back.’
So, what are the options for people like Carole? Is it possible to secure a rental property without paying a deposit? Or paying a smaller, more affordable deposit?
One option is a Zero Deposit scheme – which is regulated by the Financial Conduct Authority to make sure tenants are fully protected.
It’s basically an alternative to a traditional cash deposit, designed to cut the upfront cost of renting for tenants, whilst providing the same level of protection for landlords.
Referencing, check-in and check-out procedures all remain the same, and if there is any damage to the property or unpaid rent, you will need to reimburse the landlord yourself.
‘Our research shows that a significant proportion of tenants are forced to borrow money for their deposit when they move,’ says Jon Notley, Chief Executive of Zero Deposit.
‘The situation is often made worse when they have a deposit already locked up in their current property and which they don’t get back until after they’ve moved.
‘Products like the Zero Deposit Guarantee lower the upfront cost of renting and can make the process much less stressful, giving the landlord the equivalent protection to a deposit and providing an attractive alternative for tenants.’
Tips on how to get your deposit back
It’s best to write or email when you ask for your deposit back – if you do, you’ll have a record of when you asked for it.
You’ll have a better chance of getting all or most of your deposit back if you leave the property in the same condition as when you moved in.
If possible, you should:
- Take photos of the property to show how it was when you left
- Get a check-out inventory and ask your landlord to sign it – this could include things like the condition of carpets and walls
You might not get the full amount of your deposit back if, for example:
- You owe rent
- You’ve damaged the property – this could be something like a spill on the carpet or a mark on the wall where you’ve hung a picture
- You’ve lost or broken some items from the inventory, like some cutlery or mugs
Your landlord shouldn’t take money from your deposit, for example, to:
- Replace a worn carpet with a new one if it’s worn out gradually over time
- Fix any damage caused by a repair they didn’t do when they should have, for example a leak you told them about that got worse and damaged the floor
- Decorate a whole room if there are a few scuff marks on a wall that have appeared while you’ve lived in the property
Your landlord can’t take money from your deposit for ‘reasonable wear and tear’.
Your landlord can’t take unreasonable amounts of money from your deposit. They should tell you why they’re taking money off – if they don’t, ask them.
If you still can’t agree with your landlord, you can take further action.
But, it’s up to individual landlords to decide whether or not they accept Zero Deposit schemes, so this won’t be a solution for everyone.
It’s also important to note that you won’t get your policy money back at the end of the agreement – even if there are no issues with the landlord. A Zero Deposit Guarantee costs a tenant one week’s rent, so if your rent is £220 per week, that is the cost – and you won’t get that back.
The good news is that the rental market is definitely evolving, and the situation is improving for tenants – slowly.
The Tenant Fees Act came into force in June this year and it stops landlords from charging tenants excessive fees – other than the ones allowed by the act. It also caps deposits.
‘Under the Act, a refundable tenancy deposit is capped at no more than five weeks’ rent where the total annual rent is less than £50,000, or six weeks’ rent where the total annual rent is £50,000 or above,’ explains Nina Patel, Head of Housing and Welfare at Broudie Jackson Canter solicitors.
‘Refundable holding deposits, which can be charged to reserve a property, are capped at no more than one week’s rent.
‘Landlords can only keep deposits in cases where there is damage to the property or the tenant has fallen into arrears with their rent.’
Nina says that under the new regulations, deposits should always be placed in a protected deposit scheme.
‘If it turns out their deposit was not protected appropriately, they are entitled to up to three times the value of their deposit,’ she adds.
Nina suggests that a great way to avoid falling into debt is to be in direct communication with your landlord. She says that as long as you have a good relationship, you should be able to find a solution to avoid falling into the trap of deposit overlap.
‘In order to try and make the moving between rented homes a bit less painful financially, tenants should liaise with their landlords to agree their deposit repayment in good time,’ says Nina. ‘Or you can sometimes arrange to retain the deposit and pay it as rent in the period leading to their departure.’
What are landlords legally allowed to charge you?
Under the Tenant Fees Act, landlords are allowed to charge the fees below:
- A refundable tenancy deposit capped at no more than five weeks’ rent where the total annual rent is less than £50,000, or six weeks’ rent where the total annual rent is £50,000 or above
- A refundable holding deposit to reserve a property, capped at no more than one week’s rent
- Payments associated with early termination of the tenancy – when the termination is requested by the tenant
- Payments capped at £50 (or reasonably incurred costs, if higher) for the variation, assignment or novation of a tenancy
- Payments for utilities, communication services, TV licence and Council Tax
- A default fee for late payment of rent and replacement of a lost key/security device giving access to the housing, where required under a tenancy agreement
Nina Patel, Broudie Jackson Canter solicitors
The options for renters are pretty limited. If you don’t have the option of moving home to save up to buy somewhere, you can feel locked in an endless cycle of unstable contracts, scrambling to find a deposit every time you move.
Researchers found in 2018 that the average duration of a tenancy was just 20 months – that’s a lot of financial pressure to find yourself under every two years.
‘The tenant fees ban has no doubt reduced the amount of money a tenant has to pay when moving home, and I don’t see a time where mandated fees will return,’ says Oli Sherlock, Head of Insurance at lettings platform Goodlord.
‘However, I do see the rental market changing in terms of the services and products which tenants are offered. Deposit replacement services are a good example of this, and I think we’ll see them increase in popularity.
‘However, before taking out any scheme both landlords and tenants should understand how it will affect them before, after and during the tenancy and ensure they are on the same page. Transparency is always absolutely key.’
Oli explains that when tenants move, landlords are required to pay the deposit back within ten days after all disputes have been settled and any costs agreed.
‘Tenants should bear this time lag in mind when moving to a different property. It is more than likely they will have to save a little more than expected to pay their next deposit, as they won’t necessarily have received their previous deposit back at that stage.’
But for many renters, the idea of saving anything on top of their monthly payments would feel like an insurmountable challenge.
According to research from PwC, London is set to become a city of renters with just 40 per cent of people owning their own home by 2025.
Many renters in Europe enjoy greater stability, and there’s no reason that shouldn’t be the case for UK tenants as well.
In order to make renting a truly sustainable option – particularly for people living in big cities – it’s imperative that rental deposits and fees don’t have a knock-on affect that can spiral people into debt that could take months or years to recover from.
The Tenant Fees Act is a good starting point, but renters need more stability and longer, fixed-term contracts that will help to remove the additional costs of moving frequently.
According to figures from Which? last year, 43 per cent of renters take on debt (in the form of credit cards, loans or asking family for help) as they wait for landlords to return money and respond to challenges to deductions.
One in six tenants waited more than four weeks to get their deposit back, and 31 per cent had to pay a new security deposit before having their previous one returned.
The watchdog found that renters turned to a credit card, loan or overdraft, or borrowed money from family and friends, to cover the expense.
And, while the new Act is beginning to change things for the better, far too many renters are still trapped in a system that rarely works in their favour.
Debt Month
This article is part of a month-long focus in November all about debt.
Scary word, we know, but we're hoping if we tackle this head on we'll be able to reduce the shame around money struggles and help everyone improve their understanding of their finances.
Throughout November we'll be publishing first-person accounts of debt, features, advice, and explainers. You can read everything from the month on the Debt Month tag.
If you have a story to share, a topic you want us to cover, or a question that needs answering, get in touch at MetroLifestyleTeam@Metro.co.uk.
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source https://metro.co.uk/2019/11/07/rental-deposits-are-getting-people-into-an-inescapable-cycle-of-debt-11037582/
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