What is a Deposit Replacement Scheme?

In a nutshell, deposit replacement schemes are services taken out by tenants to provide protection to the landlord against any potential breaches of the tenancy agreement. In most cases, the tenant pays a non-refundable fee instead of a traditional deposit of five or six weeks’ rent.

Tenants who choose to pay for a deposit replacement scheme will still be fully responsible for paying rent and fulfilling the terms of the tenancy agreement. Traditional deposits are still the preferred method by some majority, however the amount of people choosing deposit replacement services is growing. 

There are a number of reasons why tenants are taking up the service -from the ability to reduce the pressure on the initial monthly bills, releasing a previous traditional deposit and utilising it to furnish the property to just wanting to keep their money in their bank account - and the demographic of tenants choosing deposit replacement schemes is broad.


  • Tenants pay a non-refundable fee instead of a traditional, refundable deposit of five or six weeks’ rent, which means securing a new property has less impact on their immediate cash flow.
  • They are liable for any unpaid rent or damage to the property (allowing for fair wear and tear). Any costs that tenants are liable for would be calculated at the end of the tenancy.
  • Some deposit replacement schemes may charge a yearly renewal fee and others are chargeable monthly, so depending on your expected tenure within the property,  it’s important to be aware that they could sometimes cost more than a traditional deposit.
  • Tenants are always given a choice between a traditional deposit and a deposit replacement service.


  • Deposit replacement schemes usually give landlords more weeks of protection against unpaid rent and dilapidations than a traditional tenancy deposit, which is capped at five or six weeks’ rent under the Tenant Fees Act.
  • Tenants who choose a deposit replacement scheme have increased liability to comply with their tenancy agreement.
  • Deposit replacement schemes aim to reduce the claim time compared to a traditional deposit registration scheme.
  • Deposit replacement schemes could also help to reduce void periods, because they reduce the upfront costs for potential tenants to secure a property.