Zero Deposit Scheme

A zero deposit scheme, also called a deposit replacement or deposit-free scheme, is an arrangement where a tenant does not pay a traditional refundable cash deposit. Instead, the landlord accepts an insurance-style guarantee from a third-party provider. The tenant pays a smaller, non-refundable fee, often around one week’s rent plus set-up and sometimes annual renewal charges.

The scheme then promises to compensate the landlord for unpaid rent, damage or cleaning costs, sometimes up to a higher amount than a capped cash deposit. However, the tenant normally remains fully liable: if the provider pays out to the landlord, it will usually pursue the tenant for reimbursement.

Zero deposit schemes are not classed as tenancy deposits, so the money is not protected in a government tenancy deposit scheme. They are separate financial products governed by contract law and, for some providers, by Financial Conduct Authority (FCA) rules.

Under the Tenant Fees Act 2019 and strengthened enforcement and redress powers being brought in under the Renters’ Rights Act 2025, landlords and agents should not normally force tenants to use a zero deposit scheme or make it the only option.

Tenants should compare total long-term cost, refundability and dispute processes against a standard protected deposit before deciding.