Deposit alternative schemes grow beyond student lets — agents should check Tenant Fees Act, deposit protection and disclosure risks before launch

A deposit alternative is not the same as a tenancy deposit, and that distinction matters under the Tenant Fees Act 2019. Lang Llewellyn & Co in Cornwall has announced a partnership with Reposit across about 1,000 rental properties, aimed mainly at students, with eligible tenants paying a non-refundable fee equal to one week’s rent instead of lodging a traditional five-week deposit. Reposit says the average cash deposit it replaces is £1,351. Before any London agent or landlord copies that model, the first compliance check is simple: confirm that the fee structure is lawful, genuinely optional and accurately described, rather than assuming a branded product is automatically compliant.

Why the legal classification matters

A traditional tenancy deposit is refundable, must usually be protected in an authorised scheme within 30 days of receipt, and triggers prescribed information duties under the Housing Act 2004. A deposit alternative fee is typically non-refundable and does not operate within the standard tenancy deposit protection framework. That does not remove regulatory risk; it changes it.

If a tenant is told, or led to believe, that a non-refundable fee works like a protected deposit, the agency could create exposure under the Tenant Fees Act 2019 and the Consumer Protection from Unfair Trading Regulations 2008. The source material does not point to any new government rule change here, so this is not a new-law story; it is an operational compliance story.

Check whether the product is truly optional

The most important practical question is whether the tenant can still choose a traditional tenancy deposit. Under the Tenant Fees Act 2019, landlords and agents cannot require a prohibited payment. Whether a particular deposit alternative model is compliant will depend heavily on how it is structured and presented. If the non-refundable fee is the only route offered, or tenants are pressured into taking it, the risk increases materially.

Before rollout, agencies should check:

• whether a standard cash deposit remains available as an alternative
• whether marketing copy and negotiator scripts make that choice clear
• whether any default settings in offers or application forms steer tenants into the fee product
• whether the total amount payable at move-in is explained accurately and in plain English

Landlord consent should be explicit

For London property teams, landlord consent is the first operational step. In boroughs with heavy student or sharer demand such as Camden, Islington, Southwark, Hammersmith & Fulham and Tower Hamlets, negotiators may see deposit alternatives as a way to reduce move-in costs and speed up deal progression. That commercial benefit is not enough on its own.

Landlords should opt in in writing before a property is marketed on that basis, because recovery routes, claim evidence requirements and timescales may differ materially from a standard deposit deduction process. If your management agreement is silent on deposit alternatives, update it before first use rather than relying on a broad discretion clause.

Due diligence on the provider is not optional

Property managers need the full product terms, not just the sales summary. Specifically, check:

• claim caps
• exclusions
• whether cover responds to rent arrears, damage, cleaning, missing items, legal costs or abandonment
• notification deadlines after check-out
• the evidence standard for claims
• how disputes and rejected claims are handled

Ask for worked examples and rejected-claim scenarios. The source summary does not provide those figures, so if your team cannot explain them, they should not be presenting the product to landlords or tenants yet. In London, where rents can be high, any cap below the landlord’s realistic exposure needs to be understood in advance.

Documents must match the payment model

Documentation is where agencies often create avoidable risk. Tenancy agreements, offer letters, pre-contract explanations, check-in packs and end-of-tenancy letters must all reflect the actual payment model.

If the tenant pays a non-refundable fee, say exactly that in plain English. Do not describe it as a “deposit” for convenience. Do not issue standard tenancy deposit prescribed information unless a cash deposit has actually been taken. Equally, make sure the contract states what recourse remains available to the landlord if the provider rejects or limits a claim. A deposit alternative is not a promise that every loss will be reimbursed automatically.

Transparency to tenants is critical

A one-week fee may look attractive against a five-week cash deposit, particularly for students, relocators and younger renters, but the legal risk increases if tenants are not told clearly that the fee is non-refundable. That disclosure should appear before they commit, not buried in terms after referencing.

Staff should also explain:

• whether a traditional deposit is available instead
• any additional charges
• the complaints route
• whether the tenant remains liable for sums above any provider payout

If a tenant later argues that they were pushed into the product or did not understand it, the paper trail will matter.

Referencing, guarantors and Right to Rent still need consistency

The announcement says eligibility is subject to successful referencing or a UK guarantor. Agents should record exactly which route was used and keep evidence on file. For student tenancies in London, where guarantor use is common, make sure guarantor forms, affordability checks and identity verification are consistent with your existing process.

This does not remove Right to Rent duties where they apply, and it should not weaken normal underwriting standards simply because the upfront move-in cost is lower.

Review data sharing and privacy wording

Data protection is often left too late. If tenant or guarantor data is being shared with a third-party provider, review whether you need updated privacy wording and a formal data-sharing arrangement. A Data Protection Impact Assessment may also be appropriate, depending on your processing, the data involved and the scale of use.

For portfolio landlords and larger property teams, this should sit with whoever already owns supplier onboarding and GDPR controls, not with branch staff improvising at offer stage.

Test the claims process before a wider rollout

The strategic issue for landlords is recovery risk. A protected cash deposit gives a familiar route for proposed deductions, dispute resolution and partial recovery. A deposit alternative may be faster in some cases, but only if the evidence standard, claim windows and payout mechanics work in practice.

Before using one across a London portfolio, run a mock claim using a real inventory, rent statement and check-out report. Test how quickly the provider responds and whether any shortfall still has to be pursued directly from the tenant. That matters particularly for higher-rent stock, HMOs and student lets, where wear, arrears and void pressure can stack up quickly.

Three actions before rollout

First, obtain the provider’s full terms, exclusions, claim deadlines and dispute process before offering any deposit alternative on a London property.

Second, get written landlord consent and update tenancy documents, marketing copy and staff scripts before the next instruction goes live.

Third, run one internal compliance review covering Tenant Fees Act wording, tenant disclosures, GDPR data sharing and end-of-tenancy claims handling within the next 30 days.

This article is general information, not legal advice.