It’s been a sustained period of change. In a bid to seem keen to crack down on rogue landlords, government has brought in a new raft of laws. Yet the volatility of the market means there are issues other than legal obligation. Affordability of rent is one of those issues. In particular, the government has been keen to place a cap on how much a landlord or agent acting on their behalf may claim as a deposit to secure a rental. For students in particular, large deposits have proven costly.
What is the Deposit Cap?
Legislation passed last year to cap tenancy deposits on all properties at 5 weeks for properties whose rental cost is under £50,000 per year. This works out at around £962 per week or more. For properties over this rental cost, the cap is 6 weeks. This high value usually includes commercial and industrial property. Rarely does it cover property available for rent.
There is also a cap for the so-called holding deposit. This is capped at just one week for all properties. Both caps come into effect from 1st June 2019.
Why is this Changing Now?
The upcoming changes to the respective deposit caps are part of the required changes enforced through the Tenant Fees Act. This places limits on those deposits where many perceived a previous situation made the cost of renting hard for some due to unjustifiable high deposit costs, several months in some cases. Both the holding and tenancy deposit impose much lower limits while ensuring property owners are protected against tenants changing their minds and adequately covering cost of potential damage when a tenant moves out.
The Tenant Fees Act also means agents and property owners are no longer permitted to charge extra fees as they had done previously such as admin fees.
Are There Restrictions or Exceptions?
Provisions in the Act apply to new tenancies and tenancy renewals. You will not be required to part-refund the deposit for tenancies that are expected to renew after the 1st June deadline, it can remain in the holding account where it is currently located.
If you have taken deposit already for next year’s students, you are not subject to the cap. Tenants for academic year 2020-21 will, however, be subject to this cap. If you have student tenants on multi-year tenancies (as is usually the case with postgraduate students), nothing changes until they either move out or the lease comes up for renewal.
Some tenant representation groups have welcomed the move, pointing out that it allows people to move more often. It is believed that the rental market will become more fluid and free up money for tenants who otherwise would have had a substantial amount of cash locked up in Tenancy Deposit Schemes.