With many landlords and letting agents now demanding tenant deposits equivalent to six weeks, many renters across the country are required to stump up more than £1,000 to secure the keys to a new home before they have even paid the first month’s rent, and that is simply too much, according to the head of Canopy.
Tahir Farooqui, CEO and founder of Canopy believes that the simplest and most effective solution to offer a better deal for renters is to provide an alternative to deposits, especially as the amount required has now “spiralled out of control”.
Canopy, which has just received £1.6m in funding from strategic investors including £1.3m from Direct Line Group, aims to offer renters an opportunity to use an app to eliminate the need for tenancy deposits and help strengthen their Experian credit history by paying rent on-time.
The Canopy service is based around a RentPassportTM, which provides proof of an individual’s rental and credit history and their ability to pay rent promptly. This helps both landlords and agents to pre-approve renters, saving them significant time with the vetting process. It is also a record of trust and credibility for renters.
Farooqui said: “As rents have risen across the UK, the deposits required to even enter the UK rental market have spiralled out of control. Canopy has both the technology and relationships in place to empower renters and help them to eventually become buyers.”
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As agents and landlords know all too well- when you look at the risk involved in terms of the possible rent void when evicting a non-paying tenant and/or the possible damage an unruly one can cause, asking tenants to part with £1,000 (or more) is not really that much to ask. Whilst references can tell you so much, holding a sizeable amount of Tenant cash is a useful leverage to have should things start to go awry.
What is also concerning is the questions over the genuine value to the tenants that some of these schemes offer- and it is essential that tenants are very clear on what they are and aren't getting under what is being offered. For instance, I am aware of one scheme where, should a tenant contest a deduction and it 'fail' they are charged a fee of £120 + VAT.
One of the large selling points is the reduced admin placed on agents however the tail-end process of check outs, deductions and the process involved remain (by and large) unchanged. As such, the savings are at the start of the process- but those with good systems in place know this is not the onerous part of deposits.
Of course, I would say this, as I am building The Depositary which is focusing heavily on the tail-end system.
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