A Guide to Deposit Alternative Products for Tenants

Deposit alternative products, sometimes referred to as deposit replacement products, are becoming increasingly popular with both landlords and tenants across Manchester and Greater Manchester.

Against the backdrop of the ongoing cost of living pressures, these products can offer a practical and flexible option for renters who would prefer not to lock away a large lump sum at the start of a tenancy. Instead of paying a traditional cash deposit of up to five weeks’ rent, tenants can choose to pay a much smaller, non-refundable fee, usually equivalent to one week’s rent.

Deposit alternative products are recognised in the government’s How to Rent guide as a compliant option under the Tenant Fees Act, provided tenants are given a clear choice between a traditional cash deposit and a deposit alternative. The guidance also recommends checking that any product used is regulated by the Financial Conduct Authority.

At Normie Estate Agents, our chosen deposit alternative provider is Reposit. We selected Reposit because we believe it offers reliable protection for landlords and genuine value for tenants. Reposit is independently authorised by the FCA, ensuring it aligns with the government guidance set out in the How to Rent guide.

As a Manchester-based, family-run estate agency, Normie Estate Agents is committed to providing a best-in-class service to both tenants and landlords across Prestwich, Whitefield, Radcliffe and the surrounding areas. To remove any confusion around deposit alternative products, we have put together this straightforward guide explaining how they work and who they may suit

What is a deposit alternative product?

Traditionally, tenants are required to provide a cash deposit of up to five weeks’ rent at the start of a tenancy. A deposit alternative product reduces this initial outlay significantly.

Using Reposit, tenants pay a one-off, non-refundable fee equivalent to one week’s rent at the start of the tenancy instead of providing a cash deposit. We believe that offering tenants a clear choice between a traditional deposit and a deposit alternative gives them greater control over their finances and helps them move home with less financial strain.

It is important to note that deposit alternative products are not insurance policies for tenants. Tenants remain fully responsible at the end of the tenancy for any valid costs, such as damage beyond fair wear and tear or rent arrears.

What are the benefits for tenants?

The most obvious benefit is the reduced upfront cost. Paying the equivalent of one week’s rent can help tenants avoid borrowing money to fund a traditional deposit, free up cash for moving costs, or allow them to save or invest their money elsewhere.

Unlike cash deposits held in government-approved schemes, which do not earn interest, tenants may prefer to put their money to better use, particularly at a time when inflation has been high and household budgets are under pressure.

There is also a common misconception that tenants who struggle to provide five weeks’ rent upfront cannot afford a tenancy. In reality, the ability to produce a lump sum deposit is not a reliable indicator of a tenant’s long-term affordability. Referencing, credit checks and affordability assessments carried out by professional referencing providers remain the most accurate way to assess whether a tenant can comfortably afford the monthly rent.

Research commissioned by Reposit in May 2023 found that around 30 percent of renters relied on overdrafts, credit cards, loans or borrowing from friends and family to pay a traditional deposit. By using a deposit alternative product, tenants can avoid high-interest borrowing, such as credit cards that often charge over 20 percent APR, and start their tenancy in a stronger financial position. This, in turn, can reduce the risk of rent arrears.

What happens if there is a dispute?

At the end of the tenancy, tenants using a deposit alternative product have the same rights and responsibilities as those who paid a cash deposit. They remain liable for any legitimate charges, such as rent arrears or damage.

If an agreement cannot be reached, tenants have the option to dispute the charges. Disputes are handled through an Alternative Dispute Resolution process. With Reposit, a £60 dispute fee applies, which is refunded if the adjudicator reduces the charges. One advantage of Reposit is that formal disputes are typically resolved within 14 days, providing clarity for both landlords and tenants without unnecessary delay.

For more detailed information, tenants can visit Reposit directly.

Final thoughts

Deposit alternative products are not suitable for everyone, but for many tenants they can provide a flexible and cost-effective alternative to a traditional cash deposit. At Normie Estate Agents, we believe in offering choice, transparency and clear advice so our clients can make informed decisions that suit their circumstances.

Disclaimer: This article is not financial advice. It is intended solely to explain why Normie Estate Agents offers a deposit alternative option to our landlords and tenants. Independent and professional advice should always be sought before entering into a tenancy or purchasing any financial product.