You found a flat advertised as "zero deposit", and it felt like a relief. No big lump sum to find before you move in. Then the agent explained that instead of a deposit you pay a fee to a scheme like Zero Deposit, Reposit or flatfair, and you started to wonder what you were signing up to.
Two assumptions trip renters up here. The first is that you have to take the scheme if the landlord offers it. The second is that "no deposit" means no money at risk. Both are wrong, and knowing why can save you a fee you never get back.
What is a zero deposit or deposit replacement scheme?
A deposit replacement, sometimes marketed as "zero deposit" or "no deposit", is a product a landlord uses instead of taking a traditional tenancy deposit. Rather than paying five or six weeks' rent up front and getting it back at the end, you pay a smaller non-refundable fee to a private company. That is usually around one week's rent as a one-off, or a smaller monthly charge, depending on the product.
The company then gives the landlord cover, so if you leave owing rent or the landlord claims for damage, the company pays the landlord. The appeal is obvious: less money to find on day one. The catch is in the two things the marketing tends to skip, and they are the rest of this post.
Can a landlord make you use a deposit replacement scheme?
No. A landlord or letting agent can offer you a deposit replacement as an option, but they cannot require it. Under the Tenant Fees Act 2019, which applies in England, the only payments a landlord can make a condition of your tenancy are the ones on a fixed list. That list covers the rent, a refundable tenancy deposit (capped at 5 weeks' rent, or 6 weeks if your annual rent is £50,000 or more), a refundable holding deposit, and a few tightly limited extras. A deposit replacement premium is not on it.
Government's own guidance for tenants says plainly that a landlord "is not allowed to make you pay for a loan, pay for insurance or start a contract for a service as part of your tenancy", and it names deposit replacement products as an example. So a landlord who requires the product, by refusing to let to you unless you buy it, is charging a prohibited payment under section 1 of the Act. An advert saying "zero deposit only" is the warning sign, but the breach happens when the premium is made a condition of the tenancy. You are entitled to offer a normal deposit instead.
Zero deposit fees are non-refundable when you move out
This is the trade-off to weigh before you sign. A normal tenancy deposit is your money. You get it back at the end, minus any deductions the landlord can properly justify. A deposit replacement premium is a fee you pay a company for cover, and it is not returned when you move out.
The real comparison is a deposit you get back against a smaller fee you don't. Over a long tenancy, or several tenancies, that fee can add up to more than a deposit would have tied up, with nothing to show at the end. For how a normal deposit is capped and reclaimed, see our guide on how much deposit a landlord can charge.
Can you still be charged for damage under a no deposit scheme?
Yes. This is the assumption that catches people out. "No deposit" does not mean "no liability". If the landlord claims at the end of the tenancy for damage or unpaid rent, the replacement company pays the landlord, and then comes after you to recover what it paid out.
So you can end up owing the same money you would have owed with a normal deposit, only to a different company, and often through its own claims process rather than a free, independent one. Before you agree to a replacement, read how it pursues you and what you can dispute, because that is where the real cost can land.
Is a deposit replacement protected like a tenancy deposit?
No, and it matters more than it sounds. A real tenancy deposit has to be protected in a government-approved scheme (TDS, DPS or mydeposits) within 30 days, under section 213 of the Housing Act 2004. That protection gives you a free, independent adjudicator if the landlord tries to make an unfair deduction, and it can win you compensation if the landlord fails to protect the money.
A deposit replacement is not a tenancy deposit, so none of that applies. There is no approved scheme, no 30-day rule, and no free adjudicator. If you disagree with a charge, you are dealing with the company's own process. We cover the protection you would otherwise have in how to check if your deposit is protected and what counts as a fair deposit deduction.
How to reclaim a deposit replacement fee you were made to pay
If a landlord or agent required you to buy a deposit replacement, rather than genuinely offering it as a choice, you can get that money back. Charging a prohibited payment carries a penalty of up to £5,000 for a first breach, and up to £30,000 or prosecution for a repeat within 5 years. A tenancy term that requires a prohibited payment is not binding on you.
Here is the order of steps:
- Write to the landlord or agent asking for the premium back, on the basis that it was a prohibited payment under the Tenant Fees Act 2019.
- Report it to your council's trading standards or private-sector housing team, who enforce the ban and can fine the landlord or agent.
- Apply to the First-tier Tribunal (Property Chamber) if they refuse, which can order the landlord or agent to repay a prohibited payment.
If you were pushed into a zero deposit scheme and are not sure whether it was allowed, Remedy can check whether the charge was permitted and help you get it back if it wasn't.
