Campaigns Regulation and Enforcement

“Vulnerable tenants will suffer” as deposit U-turn fails Government’s own test

Victoria Barker
Written by Victoria Barker

The RLA is warning that tenants who are on benefits or who own a pet will suffer, after the Government announced plans to cut its new deposit cap from six to five weeks.

The cap, which is being introduced under the new Tenant Fees Bill next year, was set at six weeks rent in May. At the time, the Government said that a deposit cap of six weeks rent would

“offer greater affordability benefits to tenants whilst minimising the financial risk to landlords and allowing them greater flexibility to accept higher risk tenants such as those with pets” adding “we can see the benefits of a cap at five weeks’ rent in terms of improved tenant affordability, but a cap of six weeks’ rent could better support both landlords and tenants by giving landlords greater financial flexibility.”

However, in a U-turn on Tuesday the Government announced that it has formally tabled an amendment to the Tenant Fees Bill to change the deposit cap from six to five weeks.

Under the amendment:

  • The cap will be five weeks’ worth of rent where the annual rent in respect of the tenancy immediately after its grant, renewal or continuance is less than £50,000.
    The cap will be six weeks’ worth of rent where the annual rent in respect of the tenancy immediately after its grant, renewal or continuance is £50,000 or more.

Responding to confirmation that the Government has u-turned on its decision to cap tenancy deposits at six weeks, by reducing this to five for most tenancies, David Smith, Policy Director for the Residential Landlords Association said:

“In doing a complete about turn on this, it is unfortunately vulnerable and elderly tenants who will suffer, just as Ministers stated when they initially approved a six week cap. Those who will now find it more difficult to secure a home to rent will include those on benefits and those who have a pet as a companion.

“In May, Ministers argued that a cap of six weeks offered a balance between affordability benefits and financial risk to landlords and providing confidence for them to rent to higher risk tenants. They considered that a 5 weeks cap did not offer that protection. Nothing appears to have changed since so Ministers were right then and wrong now.”

The Tenant Fees Bill (in England) has completed its passage through the House of Commons and is nearing its final stages of consideration in the House of Lords. The amendments are due to be debated in the Lords on Tuesday 11 December.

As well as an amendment to deposits, the Government had also put forward other amendments, around holding deposits and Client Money Protection. On holding deposits:

  • Where landlords and agents do retain a deposit, they must explain to the tenant in writing why they are doing so.
  • Landlords and agents are only allowed to take one holding deposit for a property at any one time. They must pay the first prospective tenant’s deposit back in full before taking a second holding deposit (unless allowed to retain the deposit e.g. because the tenant chooses not to enter into the tenancy, or provides false information).
  • If there is the right to retain the deposit, but the tenancy is still entered into, it must be returned to the tenant.
  • The holding deposit must also be refunded if a requirement is imposed which breaches the ban or if the landlord or tenant behaves in an unreasonable manner, so that the tenant cannot be reasonably expected to enter into the tenancy.

Read more about the bill here.

About the author

Victoria Barker

Victoria Barker

Victoria is the Communications Officer for the RLA.

She is responsible for producing articles for our Campaigns and News Centre, the weekly E-News newsletter and media review, and creating social media content. She also contributes to our members magazine, Residential Property Investor.

5 Comments

  • Precisely. When tenants give a month’s notice they often unlawfully do not pay the rent in the last month. With six weeks deposit that at least leaves a little to cover some damage and cleaning which is sometimes necessary. With this amendment it leaves only the equivalent of a few days rent.

    Landlords usually will only accept pets with an additional deposit to cover the extra damage they often cause. With the restriction on deposits landlords will be even more disinclined to let to tenants with pets. Even worse, some tenants introduce a pet in breach of their contract and this new limit severely limits restitution for damage caused.

    Likewise if the landlord has any doubts about the ability of a prospective tenant to pay the ongoing rents he is less likely to accept him or her as a tenant without an adequate covering deposit.

    Likely the Government has been advised and considered that it is better that tenants should have to pay less upfront. However, that will not help them when landlords understandably refuse to let to them and rents rise in consequence.

    As usual, the Government is ill-informed and mistaken and the real law of unintended consequences will result.

  • I too will be looking for 5 weeks rent as a Deposit now and a Guarantor for any riskier tenants.

    All the Government have done is increase costs for Tenants!

  • Like a number of Landlords and Agents I know I too will be looking for 5 weeks rent as a Deposit now and a Guarantor for any riskier tenants.

    All the Government have done is increase costs for Tenants with a bigger Deposit and Guarantor costs!

  • Don’t they understand that this is our living, that this is how we pay our way in the world? If they keep current anti-landlord trends up huge numbers of us will throw in the towel or be repossessed resulting in flooding the market with properties made cheap by the consequential glut.
    This in turn will affect the values of all UK properties, put many mortgage lenders out of business due to unrecoverable loans to bankrupt landlords not being covered by what they might achieve at auction.
    If mortgage lenders go out of business, then so will the banks and funds they borrow from, and so on . . .
    This could make 2008 look like a minor inconvenience.
    And, of course, those of us that succumb to this potential disaster will be on Universal Credit, waiting 8 weeks for our money and costing the tax payer a fortune. Though by then the homeless on the streets will be squatting in all the empty repossessed houses and paying nothing!
    Does that sound apocalyptic? We are a razorblade’s width away from it. One little extra cost, such as rip off HMO licenses or landlords having to pay all agents fees when they can no longer charge the tenants fees for finding homes for them, may well tip the balance.

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.