Helpful Tips Tenancy Management

Call of the Week: Deposits and the tenant fees ban in England

Call of the week
Landlord Advice
Written by Landlord Advice

This week the advice team were able to assist one of our members with a matter relating to their tenancy deposits.

The landlord was aware that under the Tenant Fees Act, introduced in England last June, capped security deposits at five weeks rent (for tenancies where the annual rent is below £50,000) and six weeks.

The member called in relation to one of their tenancies that was signed slightly before the fees ban came into force in England, in May 2019.

The landlord had a suspicion they had charged a slightly higher amount for the security deposit – more than what five weeks worth of rent would be.

The tenancy is soon to come up for renewal, and the landlord had seen lots of news reports about the tenant fees ban and wanted to double check two things. Firstly, whether the amount they charged last year for the security deposit is higher than the five week limit-and if so if and when they should pay the excess amount back to the tenant.

The advice

With the Tenant Fees Act attaching on to pre-existing tenancies in England this June, questions on the tenants fees ban are quite common for our advice team.

The first step for this landlord would be to calculate if the deposit that was taken does exceed the new five week limit. To do this, landlords should do the following calculation:

  • One months rent x 12
  • Divide by 52
  • Times the figure by 5

The landlord had already done this calculation using the deposit cap calculator powered by TDS and had worked out that he had charged the tenant a security deposit that was slightly higher than the 5 weeks worth of rent amount.

As the landlord was planning on renewing this tenancy, in the eyes of the law deposits would be considered to be taken at the start of every new tenancy – so this landlord is required to return the excess amount that is above the limit. This should be done upon the tenancy being renewed and can be done by contacting the deposit scheme.

Another option would be for this landlord to increase the rent slightly so that it meets the amount of security deposit that was charged – however this wasn’t something this landlord wanted to do.

Maria Sheldon, Advice Team Leader, said “This can be a tricky part of the fee ban to grasp at first, but our advisors are on hand to help our members with this situation. Landlords may also wish to check both their tenancy agreements and when they took their deposits and prepare for the end of the transitional period.”

  • The tenant fee ban’s transitional period ends this year and it will then apply to all assured shorthold tenancy agreements from June 1st 2020.

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Landlord Advice

Landlord Advice

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  • Note that this calculation (based on “1 year = 52 weeks”) is slightly generous to the landlord,
    e.g. with a monthly rent of £1000, the formula specifies £1153.84 rather than the mathematically accurate £1150.68 (based on a 365-day year; it would be £1149.92 if an “average” year is used, or £1147.54 for an actual year which includes 29th February).

    Perhaps this is to “simplify” the calculation, or perhaps because the traditional letting period is “12 months less one day” (e.g. in on 1st July, out on 30th June)?

  • Instead of nickel and diming exactly how much the deposit can be, I am interested in instituting an effective means of ensuring that any damage and otherwise claimable items are paid at the time of occurrence rather than at the end of the tenancy so that the full five weeks deposit is always available. I suspect that enforcement could be messy but that most tenants would pay up rather than have to engage in litigation. What does anyone else think?

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