There has been some debate in the media aimed at BTL property owners on what constitutes a fair deposit amount. Landlords are presently permitted to charge a maximum of six weeks deposit imposed in 2016. It was felt that some deposits are excessive and needed to be curbed for affordability.
Government Deposit Cap
The changes came in because the government, understanding tenant concerns, felt demanding such a high deposit, especially in areas such as big cities where the rental cost is already high, is pricing many young people out of the market. Now, the RLA and other landlord groups are calling for the government to increase it to two months.
Landlords Out of Pocket
Around 40% of landlords report being out of pocket in the last three years with tenants stopping their final month of rent leaving their account to pre-empt having their deposit held back or wrongly suspecting an unscrupulous landlord will hold back their deposits for ridiculous reasons. A recent case of students winning a case when they sued an agency who withheld their entire deposit for reasons later deemed unfair hints at a level of mistrust. In their mind, tenants are protecting themselves and asking landlords to use the deposit as a final month’s rent.
A Fair Deposit – The Landlord Perspective
Naturally, we can assume landlords will want to protect their business assets and charge the maximum six weeks. We can also understand the need to request the government increases this to 8 weeks/2 months in case the tenant stops the final month of rent on moving out. That way, if there is any damage, the landlord won’t be out of pocket.
To a landlord, anything over a month would be fair to ensure that they get their money for the final month of rent and cover costs of any damage. The majority of tenants do not have deposits stopped.
A Fair Deposit – the Tenant Perspective
Tenants are now facing requests for a deposit in the region of £1,000 and some feel this is excessive and unaffordable. With so much money at stake, tenants will not want to put themselves in a position where they are ripe for being ripped off by unscrupulous landlords. Even those that do have a good relationship will experience problems – being asked to save for a new deposit when moving and then having to wait to get a refund. In these economically difficult times, most people don’t have that level of savings and liquid cash.
To a tenant, a fair deposit would be as small as possible – especially for student tenants whose budgets are far more limited than the general population. There seems to be some common ground on the 6-weeks rule. But with a government determined to help tenants as much as possible, changes are likely once more.