Tenancy deposit cap to be cut to 5 weeks

by David Asker

10:40 AM, 10th January 2019
About 6 days ago

Tenancy deposit cap to be cut to 5 weeks

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Tenancy deposit cap to be cut to 5 weeks

The government confirmed last month that Tenant Fees Bill stipulates that the total deposit that can be taken from a tenant paying up to £50,000 in rental over a 12-month period is being capped at a maximum of five weeks rent.

The introduction of this cap will mean that landlords or their representative letting agents must not request more than 5 weeks rent as a deposit from tenants.

Annual rentals of over £50,000

Any property with a rental value of over £50,000 will have a maximum deposit of 6 weeks rent.

Other amendments to the Tenants Fees bill

The Tenants Fees bill also sets out other fees that will be banned going forward including any payments over and above the capped security deposit of 5 weeks rent and a capped holding deposit of one week’s rent.

There is, however a ‘default fees clause’; this will cover additional fees that can be incurred by the tenant and these, for example, may well include late fees for late payment of rent and cleaning charges that may be applicable. These default fees must be clearly defined within the tenancy agreement.

Fees that will be affected going forward will include any fees for extending tenancy agreements, charges for property inspections and for bank transfers and reference and credit checking.

Fines for non-compliance

The maximum penalty fine for a breach will be £5,000; however repeat offenders may have criminal proceedings brought against them and could be fined up to a maximum of £30,000.

The implications

The implications for landlords of these changes will be that they will no longer have the security of taking a bigger deposit than has been set down in the new legislation.

This will be problematic if landlords have tenants who leave properties in a state of ill repair leaving the financial burden for them to deal with. If a landlord has reason to believe that a tenant might struggle to pay rent, it might be worth considering having a guarantor agreement in place.

Further information on the cap can be found here

Contact The Sheriffs Office



Comments

AJ

6:48 AM, 11th January 2019
About 6 days ago

If the cost of items such as carpet, paint, kitchens etc, followed the same cost mode as house rent does, then this is great. But i dont think the same carpet in my £100 a week house is three times more expensive in a house that is £300 a week.

So how can the deposit cover damage and repairs?

Old Mrs Landlord

8:41 AM, 11th January 2019
About 5 days ago

Reply to the comment left by AJ at 11/01/2019 - 06:48The implication of your post is that the deposit in many cases cannot cover the cost of repairs so rents will have to rise incrementally to cover the cost, especially where pets are present. That means careful tenants who respect the property will be partially subsidising those who treat it like a doss house. With regard to your point about carpets, we find on the contrary that while the two-bed houses occupied by couples have good carpets which are taken care of, our low-rent one bed flats tend to be occupied by single men who walk through the hallway in dirty footwear and sit on the sofa putting their can of drink down on the floor beside them leaving a sticky ring mark which attracts permanent dirt marks. Consequently we use cheaper carpets which are regularly replaced long before they show signs of wear. In other words it is my view that this restriction on deposits will result in small rent increases and force landlords to adopt an even more choosy 'horses for courses' type of approach to tenants and to management of their rentals.

AJ

11:21 AM, 11th January 2019
About 5 days ago

I concur, so to some it up
additional SDLT = rent rise
S24 = rent rise
deposit cap = rent rise
selective licencing = rent rise
all of the above reducing available stock = rent rise

So far so good for the tenants then

JB

11:23 AM, 11th January 2019
About 5 days ago

I agree, good tenants will be subsidising bad ones just like when you can't get rid of a tenant from hell easily and the landlord is out of pocket. I feel very sorry for all good tenants.

Good tenants should be objecting to this and campaigning for easier evictions.

Does anyone know when will this take effect?

JB

11:31 AM, 11th January 2019
About 5 days ago

Reply to the comment left by AJ at 11/01/2019 - 11:21
Good tenants should mobilise and campaign against SDLT increase, deposit cap, section 24, selective licencing etc. They seem oblivious of how it affects them.
Maybe they could ask Shelter to help them with a campaign? (just joking)

Zoe AM

13:00 PM, 11th January 2019
About 5 days ago

Question, does the Government plan to make agents refund the deposits that are over 5 weeks currently protected?

AJ

13:32 PM, 11th January 2019
About 5 days ago

Reply to the comment left by Zoe AM at 11/01/2019 - 13:00
They probably haven't thought of it, until now..........................

Seething Landlord

17:00 PM, 11th January 2019
About 5 days ago

Reply to the comment left by Zoe AM at 11/01/2019 - 13:00
I can see no indication in the Bill that any of the provisions will be retrospective.
The draft says under the heading "Commencement": Clause 23 (financial provisions) and the provisions about interpretation, extent,
commencement and short title of this Bill, together with the powers conferred by the Bill to make secondary legislation come into force on the day the Bill is passed. Other provisions of this Bill come into force on such day as the Secretary of State may by regulations appoint.

Steve Masters

18:14 PM, 11th January 2019
About 5 days ago

"The Tenants Fees bill also sets out other fees that will be banned going forward including any payments over and above the capped security deposit of 5 weeks rent and a capped holding deposit of one week’s rent."
When I first read this I thought it meant that a security deposit and fees could not together total over 5 weeks rent. Brilliant I thought, I can still charge 1 weeks rent as fees and hold a 4 week security deposit. What a fantastic compromise. But then I read it again and don't think that is the case after all. It's a total ban on all up front fees. Such a pity.
I used to charge a £120 fee to help cover all my expenses at the beginning and end of every tenancy. If a tenant decides to leave after 6 months it cost them £20 month extra, if they stay 5 years it cost them £2 a month extra. Now I will put my initial rent up £20 a month and offer a £120 rebate after each 12 months as a reward for the tenancy being respected, including all rent being paid in full and on time for the full year. After the first year I will review the rent and probably leave it the same for the second year.
What do people think of this idea?
What will you do to help pay all the costs at the beginning and end of each new tenancy?

Seething Landlord

18:57 PM, 11th January 2019
About 5 days ago

Reply to the comment left by Steve Masters at 11/01/2019 - 18:14
"What will you do to help pay all the costs at the beginning and end of each new tenancy?"
I think the only option is to absorb the costs and set the rent accordingly, which is pretty much what we have always done anyway. Bear in mind that costs incurred will be tax deductible.
You will need to be careful how you word your £20 per month rent increase/rent rebate clause in case somebody tries to argue that it is actually a deposit which a) breaches the new regulations and/or b) should be protected.

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