A web page entitled "How it works - Landlords", seen on www.flatfair.co.uk, a website for a deposit replacement company, in July 2019, included text that stated “Beat the deposit cap. Enjoy up to 12 weeks’ worth of protection and free recovery for any additional claims”. Text lower down the page stated "Keep your property protected. Get up to double the protection of a traditional tenancy deposit and significantly lower the upfront costs for your tenants". Further text stated “You get extra protection. Tenancy deposits are now capped at 5 weeks’ rent. Make substantiated end of tenancy charges for up to the value of 12 weeks’ rent through flatfair”.
Global Property Ventures Ltd t/a Zerodeposit.com understood that there was no contractual obligation on flatflair Ltd to provide the protection advertised, and challenged whether the claims "Keep your property protected" and "Get up to double the protection of a traditional tenancy deposit" were misleading and could be substantiated.
Flatfair Ltd said that Zerodeposit.com were correct that the legal structure of service provided by flatfair to tenants and landlords did not include a contractual obligation for them to compensate landlords in circumstances where the tenant did not honour in full their financial obligations under the tenancy agreement. However, that did not mean that landlords could not have confidence in the protection afforded by the service.
Flatfair said that their service protected landlords in a way that did not exclude prospective tenants who may be unable to pay an upfront deposit of five weeks’ rent. Tenants could subscribe to flatfair by paying a one-off fee equal to one week’s rent plus VAT. When the tenancy ended, the landlord or their agent would calculate any outstanding amount considered to be contractually due from the tenant and notify the tenant via flatfair’s online portal. The landlord and tenant could then negotiate the amount via the portal. In line with the process for traditional deposits, if they could not agree a figure between them, the matter was referred to a government-authorised deposit dispute resolution scheme, which would decide the amount of the “Established Charge” owed by the tenant. In the minority of cases where the tenant then failed to pay the Established Charge, the landlord could look to flatfair for assistance. One of the options they offered was for flatfair to purchase, at 100% of the nominal value of the tenant’s debt, the right to recover that debt from the tenant. The maximum value that they would purchase was an amount equal to 12 weeks’ rent. Flatfair believed this was an attractive proposition to landlords, compared to taking deposits equivalent to five weeks’ rent, which was the maximum amount they were legally allowed to take in England. That meant that, where a tenant who had paid a deposit failed to pay the last month’s rent, the landlord was left with little protection in relation to further amounts that could be due for damage to the property, etc. Where the amount of the Established Charge exceeded 12 weeks’ rent, flatfair said they sought to assist the landlord in recovering the full amount, not only the amount they had paid the landlord. They said that the claim “up to double the protection compared to a traditional deposit” was therefore not misleading and could be said to undersell the level of protection provided in practice.
Flatfair said that, since the inception of their service, in 100% of cases in which a landlord notified them that the Established Charge had remained unpaid for more than two weeks, and where the landlord complied with the referencing requirements, flatfair had chosen to purchase the debt from the landlord (subject to the cap equivalent to 12 weeks’ rent). That included a number of Established Charges that were equal to, or greater than 12 weeks’ rent. There had been three cases where they determined that the landlord had not complied with the referencing requirements. In two of those, flatfair had still chosen to purchase the debt, and in the third they recovered sums due to the landlord without purchasing the debt. They said that the landlord protection element of their scheme was just one example of schemes that provided protection to members on a non-contractual basis. The non-contractual model meant that scheme operators were not bound by obligations to insurance or re-insurance underwriters, which may cause providers to reject claims unless they met a variety of precise conditions set out in the contract. Contractual obligations did not provide a 100% guarantee for customers, since such obligations could be difficult to enforce in practice, or the provider could become insolvent. Flatfair’s business depended on their reputation and record in protecting landlords. They said that the company was itself insured. Flatfair provided a copy of the terms and conditions supplied to landlords.
The ad stated “Beat the deposit cap. Enjoy up to 12 weeks’ worth of protection and free recovery for any additional claims” and “Keep your property protected. Get up to double the protection of a traditional tenancy deposit and significantly lower the upfront costs for your tenants”. The ASA considered that landlords looking at the website would understand “Keep your property protected” to mean that flatfair offered a product that would enable them to recover costs (such as rent or costs relating to damage to the property) in the event that they went unpaid by their tenants. Text further down the page stated “You get extra protection. Tenancy deposits are now capped at 5 weeks’ rent. Make substantiated end of tenancy charges for up to the value of 12 weeks’ rent through flatfair”. We noted that, since deposits in England were capped at five weeks’ rent, “double” a traditional tenancy deposit was actually equivalent to 10 weeks’ rent rather than 12. However, considering the page as a whole, we considered that landlords would understand that flatfair’s service could enable them to recover costs equivalent to 12 weeks’ rent.
The complainant, Zerodeposit.com, believed that the claims "Keep your property protected" and "Get up to double the protection of a traditional tenancy deposit" were misleading because there was no contractual obligation on flatfair to provide the level of cover stated. However, we considered that within the context of the ad, there was nothing to imply that “protection” referred to a specific type of product that was backed by contractual obligation. We understood that there were conditions to the circumstances in which flatfair would offer to purchase a tenant’s debt from the landlord, including the requirement that the landlord had adhered to the referencing criteria specified by flatfair. We noted that those requirements were laid out in the terms and conditions, which landlords were likely to review before agreeing to a tenancy with tenants who subscribed to the flatfair service. We noted that flatfair had agreed to purchase tenants’ debt from landlords, at 100% of the value of the debt (up to a maximum of 12 weeks’ rent), in 100% of cases where an Established Charge had gone unpaid by the tenant for two weeks or more, and the landlord had met the referencing requirements. We noted that included a number of cases where the Established Charge was equal to, or greater than, 12 weeks’ rent. We considered that was sufficient to substantiate that flatfair provided “protection” at the level stated in the ad, as landlords were likely to understand it in context. We concluded that the claims "Keep your property protected" and "Get up to double the protection of a traditional tenancy deposit" had been substantiated and were therefore not misleading.
We investigated the ad under CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising), 3.7 (Substantiation) and 3.11 (Exaggeration), but did not find it in breach.
No further action required.