When starting a tenancy, tenants are typically asked to provide a deposit of up to five weeks’ rent, which is protected and returned at the end of the tenancy, unless the landlord has a valid claim for damages or unpaid rent.

Several services offer tenants the option to pay a smaller sum of money to secure a tenancy, worth either a week’s rent at the start of the tenancy, or around £30 a month. This is known variously as a deposit alternative, no deposit option, deposit-free scheme or deposit replacement.

Although this can be a useful option for some tenants, you should be aware of the pitfalls, including:

• The money is not refundable. If the landlord makes a successful claim at the end of the tenancy, you have to pay that, on top of what you paid for the scheme originally. If the landlord doesn’t make a claim, you don’t get anything back.
• The level of damages and unpaid rent can be more than the maximum five weeks covered by a tenancy deposit, so you could be on the hook for even more. The scheme may also pursue all joint tenants (and any guarantors) for outstanding claims that only one of the tenants is responsible for, e.g. if just one is behind on rent.
• While some schemes have claims handled by an accredited tenancy deposit scheme, there is no requirement for them to be regulated themselves, so if you feel you have been mistreated there is nowhere to complain to. Some schemes choose to be regulated by the Financial Conduct Authority.
• Some schemes charge you to challenge a landlord’s claim, with this being refunded if you are successful (though note that with unregulated schemes there is no organisation checking that their dispute resolution process is fair).

While these deposit alternative schemes are not regulated by the government, letting agents and landlords must give tenants the option of paying a refundable deposit if that’s what you prefer. If they do not, they are breaking the Tenant Fees Act, and you could complain to the letting agent’s redress scheme, or apply for a refund via the First-tier Tribunal.