Rental deposits to be capped at one month’s rent

Rental deposits to be capped at one month’s rent

9:42 AM, 22nd June 2017, About 5 years ago 47

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Responding to the announcement in the Queen’s Speech to cap tenancy deposits to no more than one month’s rent, Richard Lambert, CEO at the National Landlords Association (NLA) said:

“The decision to cap tenancy deposits at no more than one month’s rent smacks of a political gesture from a government desperate to court the voters who supported their opponents at the last general election.

“We estimate that around 40% of deposits exceed one month’s rent. Whilst capping them may reduce the move-in costs for some, it will increase the temptation for others to view the deposit as the last month’s rent, leaving landlords out of pocket at the end of the tenancy if, for example, the property has been damaged.

“Some landlords use a higher deposit to give them the extra confidence they need when letting to higher risk tenants, so this could also have the unintended consequence of deterring them from offering their property to those likely to be struggling with affordability in the first place”.



Comments

by Mandy Thomson

12:39 PM, 24th June 2017, About 5 years ago

As Puzzler has suggested, capping the deposit will simply lead to higher rents. As always, any policy which is damaging to landlords will ultimately be damaging to tenants and make the housing crisis worse. Landlords and tenants are not opposites, but (as Neal Patterson once said) two halves of a symbiotic economic relationship.

While, on the face of it, a deposit equivalent to a month's rent seems reasonable, as several comments on here have stated, there are occasions when it's necessary to take more because the tenant represents a higher risk; as such, this policy is doing already disadvantaged tenants no favours.

Yet another example of knee jerk, populist legislation. Of course the government is aware that this piece of legislation and all the other ill considered pieces is damaging to housing supply; the point is, they are desperate to court votes, and of course, the British public "knows" more about housing than people who provide housing for a living...

Of course, if the government were serious about improving housing, they would come up with long term strategies, after proper consultation with all involved.

by Carla mason

15:40 PM, 24th June 2017, About 5 years ago

30% of my tenants don't pay the last months rent. This could increase now with little hope of recovering any damages to the property.

by Monty Bodkin

17:19 PM, 24th June 2017, About 5 years ago

Reply to the comment left by "Carla mason" at "24/06/2017 - 15:40":

Stricter tenant selection is the obvious answer Carla. And spelling it out very clearly at the start of the tenancy what the purpose of the deposit is for and that using it for the last month's rent is totally unacceptable.

Assuming you are doing vanilla* lets, 30% is way too high, historically mine run at far less than 5% and I haven't had one in ages.

If I get an ahole tenant trying that on, all good will goes straight out the window and I would pursue them for every last legally possible penny.

I've not had this happen since MCOL came in but I'd be using that at the first possible opportunity.

I know where they work, their bank details, car details, any other property details, pension and family details. Guarantor(s) and RGI are taken where necessary.

I bend over backwards for my tenants but dicks like that deserve all that is coming to them. They also push up the cost of renting for the vast majority of decent tenants.

None of this 'throwing good money after bad' bollox. With good tenant selection, very few of them are going to go off the rails for 6 years (generally the statute of limitations).

Try zero tolerance to bad tenants- it works.

*N.B I'm talking vanilla lets here. Mature professionals with a traceable history not Student, DSS (sic), HMO's etc

by Matt Cole

20:14 PM, 24th June 2017, About 5 years ago

I'm thinking of not asking for a deposit! What I am doing is setting up a 6mth tenancy with the deposit value divided over the 6mnths. It is then added to the normal rent value each month I. E tenant pays a higher rent. I have then agreed that the tenant provides 2 months notice prior to leaving and with satisfactory property condition on the day of check out, I will reimburse 1 months rent.

I guess I just need to make sure the tenant is always within contract. Your wise council greatly appreciated.

by Carla mason

21:19 PM, 24th June 2017, About 5 years ago

Reply to the comment left by "Monty Bodkin" at "24/06/2017 - 17:19":

Last one was a solicitor. Been there for 5 years, left the place in a state, didn't vacate on the day the tenancy ended. TDS thought it was OK after 5 years to leave the kitchen dirty, damaged work surfaces, boiler casing damaged, carpets filthy,cat urinated on carpets ( no permission for the cat). All photographed and dated before and after, totally ignored by TDS. Generously allowed 25% of the cost of a cracked basin.
I wonder what TDS will do when a Landlord asks for compensation when there is no deposit due to the fact that the last months rent hasn't been paid.

by Monty Bodkin

21:53 PM, 24th June 2017, About 5 years ago

Reply to the comment left by "Carla mason" at "24/06/2017 - 21:19":

Been there for 5 years, left the place in a state, kitchen dirty, damaged work surfaces, boiler casing damaged, carpets filthy, cat urinated on carpets ( no permission for the cat).

Didn't you notice all this on your regular inspections?

(I do sympathise BTW)

by David Price

8:22 AM, 25th June 2017, About 5 years ago

Reply to the comment left by "Matt Cole" at "24/06/2017 - 20:14":

Beware! I do not take a deposit, it is clearly stated in bold large print in my tenancy agreement. I do collect about £10 a week in rent top up, the rest being paid direct by the local council. I produced a statement for the tenant showing quite clearly that this £10 was rent. At a recent section 21 hearing a judge decided that this was a deposit and advised the tenant to take me to court for three times all the payments he had made. I did not get my eviction and fortunately the tenant was too thick to realise what the judge had been saying.
Your scheme, whilst ingenious, may fall foul of a pedantic judge.

by bob the builder

9:04 AM, 25th June 2017, About 5 years ago

TDS system is broken for LL's, stop doing deposits and just increases rents.

by Darlington Landlord

21:26 PM, 25th June 2017, About 5 years ago

When I first started letting I had numerous tenants (many of them professionals!) avoid paying the last months rent assuming the deposit was good for that and leave properties filthy. I started charging a deposit equivalent to one months rent plus £50-60 and strangely enough the only times since I've had problems was when there were also significant rent arrears.
I will also let to tenants who cannot tick the boxes to get RGI so long as I am convinced they can afford the property and will look after it.

Since rents are if anything falling in my area, this means I will either have to start insisting on home owning guarantors or charging rent 6 weeks or 2 months in advance as standard. Or does anyone have any alternative bright ideas?

The law of unintended consequences!

by Mike D

23:33 PM, 25th June 2017, About 5 years ago

The other way it to take 2-3m in advance payments i've taken upto 6m in advance and a deposit, limit your risks, take an extra £100 for pets if you allow them.


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