An alternative to the Security Deposit, it’s coming…
It’s no secret that security deposits can often be a point of contention in lease negotiations. Additionally, they are very capital intensive for tenants and can involve several months of rent. Chubb, the world’s largest publicly traded property and casualty insurer, estimates that more than $150 billion of applicable security deposits are currently frozen in commercial leases in the U.S. alone. What if landlords and tenants alike could save countless hours – and even more money – with a better alternative? The real estate community has long recognized the need for a new solution to replace the traditional security deposit, and the idea has been gaining ground in the residential leasing community in recent years.
One such option is through renter-focused insurance startup, Jetty. Jetty works with landlords to offer insured security deposits to renters. For renters, instead of forking over a full security deposit, they pay a one-time fee of 17.5% of the deposit amount. Jetty then insures and guarantees the full deposit amount for the landlord. They also offer a lease-guaranty option, meaning it will co-sign on a renter’s lease, if needed, to secure the lease. For landlords, Jetty claims that the lease-guaranty product allows landlords to approve renters who otherwise would not have been able to get a lease – all while having protection from Jetty should the renter break their lease.
Another is through Obligo, a fintech startup focused on the real estate market. Obligo has raised $5 million through its latest financing round to launch its next generation security deposit alternative. Stated CEO and Cofounder Omri Dor: “With a traditional deposit, you’re paying a huge sum in advance for damage that likely won’t happen. It’s wasteful and completely unnecessary, considering what’s possible with modern financial technology. What Obligo offers is a common-sense approach. Tenants should only pay for damages if they actually cause damages.”
Now moving into Corporate Real Estate…
And luckily, the trend is gaining traction in the corporate space as well:
The latest such endeavor is through TheGuarantors, a New York based insurtech provider. It was recently announced that they have raised $15 million in Series B funding, which will be used to expand its existing platform nationwide and launch its alternative to the security deposit – Securiti™. With Securiti, TheGuarantors has created a solution that benefits everyone: tenants have an attractive alternative to costly security deposits and landlords get highly liquid, bankruptcy remote protection.
“We are excited to reach this important funding milestone,” said TheGuarantors’ Founder and CEO Julien Bonneville. “Given our strong success in New York city, we have worked over the past year to help landlords in competitive real estate markets like Boston, D.C., Chicago, LA, and Dallas increase NOI and reduce all tenant risks. Now that we are established among the residential real estate community, we want to continue to provide solutions by introducing Securiti.”
Securiti allows tenants to replace their standard security deposit for a small annual fee while landlords are provided with desired protection. And it can be used on both new and existing leases, which allows tenants to unfreeze capital and finance new projects.
“We are proud to have created a product that alleviates leasing hurdles for all members of the office rental market.” He added, “The revolutionary product is the first of its kind, offering attractive off-balance sheet financing to tenants, while bridging the negotiation gap between landlords and tenants when it comes to security deposits. From a tenant view, it’s a cheaper alternative to a business loan, with Securiti costing ~50% less than traditional financing alternatives.”
With more products entering our marketplace, we can help you navigate the leasing conversations. Contact us before entering negotiations, so we can help ensure the best terms and available products for your company.