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 

 

David Asker

David is an authorised High Court Enforcement Officer and our Director of Corporate Governance

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