LeaseLock replaces security deposits with monthly fees and believes its new insurance partnership shows that the industry is embracing its business model.
For renters, scraping together a sometimes-huge security deposit for a new apartment can be difficult and costly. It makes the renting experience extra expensive, and can even price people out of apartments they might otherwise be able to afford.
And for landlords, waiting for a renter who has a security deposit can sometimes slow the process of filling units up.
But a company called LeaseLock thinks it has a solution to these issues, and today announced a new partnership with Boost Insurance that it believes will help expand its vision of a rental world without security deposits.
Southern California-based LeaseLock essentially offers an insurance product for commercial-scale landlords and property managers with about 1,000 units or more. For $29 per month per unit, LeaseLock guarantees the landlords $5,000 in lost rent coverage and $500 in damage protection.
Property managers can tack that $29 per month onto the rent payments, much as they would with a utility bill, and in exchange they can eliminate the security deposit.
“We’re removing all the pain points of security deposits,” Reichen Kühl, LeaseLock’s CEO and founder, told Inman.
So for example, if a renter bailed on a lease early and left some damage in an apartment, a traditional property manager might withhold some or all of the that person’s security deposit as compensation.
But Kühl said that approach has a host of problems. Property managers have to collect and hold large sums of money for long periods of time, for example, and renters who get back less than they were expect tend to be outraged.
“We look at the negative reviews for property management and owners,” Kühl added, “and the vast majority have to do with not getting the right amount of the security deposit back.”
Kühl said that LeaseLock’s system solves that problem. Renters don’t have to pay any extra money up front, managers don’t have to hold onto funds in special accounts, and if there is ultimately a loss of rent or damages LeaseLock steps in and pays.
This system also makes the process cheaper for renters, Kühl argued, and according to the company’s experience so far tends to accelerate the process of filling apartments.
“When you bring in LeaseLock, leases go faster,” Kühl added.
The company also automatically pays $50 for wear and tear any time a renter in a LeaseLock-backed unit moves out, regardless of the circumstances.
LeaseLock was founded in 2012, and today has contracts with property managers that oversee more than 1.1 million units (though those managers have not yet necessarily rolled out the program for all of the units under their jurisdiction). LeaseLock also currently operates in all 50 states.
However, the new partnership with Boost Insurance should help LeaseLock grow even more.
“We’ve just never had a deal like this before,” Kühl said. “It’s just unprecedented.”
Boost is a tech-centric insurance provider that, according to a company statement, powers custom “programs for innovators.” The deal announced today means that just as LeaseLock backs property managers in the case of a loss, Boost backs LeaseLock.
Kühl said that when LeaseLock began, the only company willing to provide insurance was based in Qatar. Kühl said he was grateful that anyone would back his company, given that few people seemed to understand what LeaseLock was trying to do. But ultimately using the Qatari insurance firm made LeaseLock’s services so expensive that they didn’t really pencil in for most property managers or renters.
The significance of the new partnership with Boost, according to Kühl, is that the rental and insurance industries are finally embracing LeaseLock’s business model, allowing the company to offer ever more affordable services.
“I think it does say that we’ve hit that kind of inflection point where things have really changed,” Kühl added.
Boost CEO and founder Alex Maffeo also expressed excitement about the partnership, saying Wednesday in a statement that the two companies’ missions are “perfectly aligned.”
“They are transforming the real estate industry by applying an insurtech solution,” Maffeo said. “We are their insurance technology partner to help power their impressive growth to date and beyond. LeaseLock is truly cutting-edge in the insurtech space.”