With so much talk of lettings fees in the property industry at the moment, you may have missed the deposit changes that will be introduced under the Tenant Fees Bill.
The specialist landlord property insurer has explained exactly what these deposit changes will mean for landlords and letting agents so that you can prepare well ahead of schedule.
As you may know, the Tenant Fees Bill will become an Act of Parliament and, therefore, law, in England on 1st June 2019. It will apply to all private tenancy agreements signed on or after that date. The new law’s main provision is to ban landlords and letting agents from charging upfront fees to tenants, such as for referencing and administration.
However, under the Tenant Fees Bill, landlords and their agents will also face deposit changes, applying to both security deposits and holding deposits.
To help you understand how you will be affected, Just Landlords has the information below:
Most landlords require a tenant to pay a security deposit at the outset of a tenancy, to protect their property against any damage caused during the period of occupancy.
In a bid to reduce the hefty upfront costs that tenants face when signing a rental contract – thus making it easier for them to move home – the Government has put a restriction on the amount that a landlord can charge as a security deposit.
Under the new law, landlords or their agents can charge a maximum of five weeks’ rent of that particular property as a security deposit. To help you calculate deposits for your rental properties, Just Landlords has put together a useful guide.
This calculation can also be used for the other deposit change included in the new law…
Sometimes, landlords and letting agents may ask a tenant to pay a holding deposit to reserve a rental property before they are ready to sign the tenancy agreement. Unlike security deposits, these aren’t required to be placed in a Government-approved protection scheme (the obligation of which will still stand once the Tenant Fees Bill is implemented).
The new law will cap holding deposits at just one week’s rent of the property (to calculate this, use the link above). This will prevent landlords or their agents charging hefty sums to tenants before they’ve even decided on their new home.
Although you must be aware of the ban on lettings fees, it’s important to take note of the deposit changes that will come into force at the same time. For any tenancy agreements signed on or after 1st June, you will need to apply these deposit caps – to fully prepare, apply the calculations to the rent that you are expecting to charge beforehand so that you have a plan for the legal change.