Landlord requiring deposit-replacement scheme

Short answer

Generally no. A student landlord (or their agent) in England cannot simply require you to pay for a non-refundable zero-deposit or deposit-replacement product as a condition of getting or keeping the tenancy. Under the Tenant Fees Act 2019, any payment a landlord or agent requires you to make in connection with a tenancy is banned (“prohibited”) unless it appears on a short list of permitted payments. A non-refundable fee that you must pay to a deposit-replacement scheme does not fall within that list, so requiring you to pay it as a condition of the tenancy is unlawful.

There are, however, some important nuances about how these schemes are structured, and whether they are truly being “required” of you, which determine whether the arrangement is lawful.

The legal framework

The Tenant Fees Act 2019 applies to assured shorthold tenancies, tenancies of student accommodation and licences to occupy housing in England. It works on a “banned unless permitted” basis. Section 1 and Schedule 1 set out the only payments a landlord or agent may lawfully require in connection with a tenancy. These permitted payments include rent, a refundable tenancy deposit (capped at five weeks’ rent where annual rent is under £50,000), a refundable holding deposit of up to one week’s rent, and certain default and variation charges.

A non-refundable deposit-replacement or zero-deposit fee is not on that permitted list. Shelter’s legal guidance is explicit that a non-refundable fee for deposit-replacement insurance is a banned payment where the landlord requires the tenant to pay it as a condition of entering the tenancy. The key concept is that you never get this money back at the end of the tenancy, unlike a traditional deposit, and you can still be pursued for damage or unpaid rent on top.

Where the line falls

The lawfulness turns on whether the payment is “required” of you and how it is structured.

If the landlord insists that you must sign up to and pay for a zero-deposit or deposit-replacement product in order to get the tenancy, and you have no genuine alternative, that is very likely a prohibited payment and unlawful.

If the landlord genuinely offers you a free choice between paying a traditional refundable deposit or, as an alternative, paying for a deposit-replacement product, the position is more arguable. Government guidance for landlords and agents does contemplate these schemes operating as a genuine option. A genuine, freely offered alternative is treated differently from a mandatory condition. The problem for many students is that the “choice” is often not genuine, because the landlord will only accept the deposit-replacement product.

There is also a distinction based on who takes out the policy and how it is paid. If the landlord takes out the policy and simply builds the premium into the advertised rent, that is not a banned fee, because rent is a permitted payment. A separate, additional non-refundable charge required on top of the rent as a precondition is the problem.

What this means for you as a student

If you are being told you must use a specific non-refundable zero-deposit scheme, and you are not being offered a real option to pay an ordinary refundable deposit instead, that requirement is likely to breach the Tenant Fees Act 2019.

Be aware of the practical downside of these products even where lawful. A zero-deposit or deposit-replacement product is not a deposit that protects you. You do not get the money back. You typically pay a non-refundable premium or fee, and at the end of the tenancy the landlord can still claim against you for damage, cleaning or unpaid rent, with the insurer often paying the landlord and then pursuing you for reimbursement. So it can be worse for you than a traditional protected deposit.

Evidence to gather

Keep copies of the advert, the tenancy agreement or draft, any emails or messages where the requirement is stated, and the scheme’s own terms and conditions showing that the fee is non-refundable and how it is described. Note whether you were offered any alternative and what you were told. This evidence will matter if you challenge the charge.

Practical next steps

1. Ask the landlord or agent in writing whether you can instead pay a standard refundable tenancy deposit (capped at five weeks’ rent). Framing it as a request for the permitted alternative both protects you and tests whether the “choice” is genuine.

2. If they refuse and insist on the non-refundable scheme as a condition, point out politely and in writing that a required non-refundable deposit-replacement fee is likely to be a prohibited payment under the Tenant Fees Act 2019.

3. If you have already been charged a prohibited payment, you can request repayment. A landlord or agent cannot lawfully keep a prohibited payment, and until they return it they generally cannot serve a valid section 21 notice to evict you.

4. If they will not repay, report the matter to the trading standards department of your local council, which enforces the Tenant Fees Act and can impose financial penalties. You can also apply to the First-tier Tribunal (Property Chamber) for an order requiring repayment of a prohibited payment.

5. If you are in university-arranged or university-owned accommodation, also check the university accommodation office and any student union advice service, and the accommodation code of practice the provider signs up to, as these may give an additional, quicker route to challenge the requirement.

Key missing facts

The answer can shift depending on a few details. It would help to know whether you are being given any genuine alternative to the scheme, whether the property is a normal private let or university-managed accommodation, whether the fee is a one-off non-refundable payment or a premium built into the rent, and whether you have already paid anything. If you can tell me those points, I can be more precise about whether the specific arrangement you face is lawful and what your strongest challenge would be.