This week our advice team were able to help one of our members with a question relating to tenancy deposits and the end of the transitional period of the Tenant Fees Act 2019 in England.
The Tenant Fees Act, which came into force on June 1st 2019, introduced a deposit cap of 5 weeks’ rent for tenancies of less than £50,000 rent per year. It also banned almost all fees and has a transitional period whereby it only applied to brand new or renewed tenancies between 1st June 2019 and 1st June 2020. At the expiry of the transitional period then all tenancies that the legislation covers will then be caught, regardless of when they were signed.
One of our members gave our team a call this week because they wanted clarity on what to do with their deposits.
The landlord has ongoing tenancies which are about to be caught by the legislation, but have deposits of more than 5 weeks’ rent. They wanted to know if they needed to return the excess deposit before the 1st June, after this date – or if they even needed to do this at all.
We advised our member of the different outcomes that can occur relating to the 1st June date, and the status of their tenancies.
If a tenancy becomes statutory periodic, then without going into too much detail in this article, at law the deposit is seen to have been repaid to the landlord who in turn hands it back to the tenant, of course none of this takes place in the real word, but legally speaking this occurs.
This nuance of statutory periodic tenancies means that the tenants deposit has been taken again, and if this occurs after the 1st June 2020, the landlord has received a deposit in excess of 5 weeks, at a point in time where the act has caught the tenancy. Landlords in this situation would have to either repay the excess or increase the rent to make the deposit value fall within the now higher 5 weeks of rent value.
If it were to become statutory periodic before 1st June 2020, or rolls on as contractual periodic tenancy, then landlords do not need to worry about returning the deposit excess to the tenant. This is because when the deposit was taken, the act didn’t apply, and at the point the landlord receives it again the act still doesn’t apply. This is because with a contractual periodic contract, you never take the deposit for a 2nd time.
The landlord was now clear on what the Tenant Fees Act legislation meant for his properties, and thanked our adviser for their time.
- For more information about the Tenant Fees Act, have a read of our online guide for landlords.