How Much Can A Landlord Charge Me For A Deposit?

How Much Can A Landlord Charge Me For A Deposit?

Introduction

In England, The Tenant Fees Act came into force on 1 June 2019 which is in place for all assured shorthold tenancies, tenancies of student accommodation and licences to occupy housing in the private rented sector in England.

The Tenant Fees Act made it illegal for landlords and letting agents to charge certain fees in connection with a tenancy, as well as placing a cap on the amount landlords and letting agents can charge a tenant for a holding deposit and a security deposit.

Although the act came into force on the 1st of June 2019, landlords and letting agents had a 12-month transitional period, which meant they could continue charging fees on tenancies which came into effect before 31 May 2019 until 31 May 2020.

As of the 1st of June 2020, legislation is now binding all on tenancies, even those which commenced before the legislation came into effect.

What are the main changes?

Any tenancy which was signed on, or after 1 June 2019, has to fall in line with the deposit cap rules laid down in the Tenant Fees Act 2019.

On most residential tenancies, the deposit amount a tenant can be charged will depend on the annual rent being charged, as follows:

  • Where the annual rent is up to £50,000, a maximum of five weeks’ rent
  • Where the annual rent is over £50,000 and under £100,000, a maximum of six weeks’ rent
  • Holding deposits are capped at one week’s rent.

This applies to assured shorthold tenancies, tenancies of student accommodation and licences to occupy housing in the private rented sector in England.

How is this different compared to before the 1st of June 2019?

In summary, before the Tenant Fees Act 2019, the majority of fees that a landlord or letting agent could charge were uncapped. See our breakdown below:

Holding Deposits

Before: Uncapped and no legal requirements around timescales to return the holding deposit during the tenancy.

After: Capped at a maximum of one week’s rent and the holding deposit must be refunded within seven calendar days of the tenancy not being entered into (unless it is agreed to be used towards rent or the security deposit) or fifteen calendar days from receipt of the deposit deadline being reached.

Security Deposits

Before: Uncapped

After: The refundable tenancy deposit is capped at no more than the equivalent of five weeks’ rent where the annual rent is less than £50,000, or six weeks’ rent where the annual rent is £50,000 or more.

Pet Deposits

Before: Uncapped. Often taken by landlords and letting agents in addition to the security deposit if they permit the tenant to keep a pet at the property.

After: The total deposit taken cannot exceed the amount outlined above, therefore if the deposit amount taken is already at the maximum amount, no further monies can be taken as a pet deposit.

How much should your deposit be?

To calculate how much your security deposit should be, please follow the calculation below:

  1. Monthly rent x 12 = annual rent
  2. Annual rent ÷ 52 = weekly rent
  3. If your annual rent is less than £50,000, multiply your weekly rent by 5 = the security deposit cap
  4. If your annual rent is more than £50,000, multiply your weekly rent by 6 = the security deposit cap

What happens if the landlord or letting agent does not comply with these legal requirements?

A breach of this legislation will usually be classed as a civil offence with a financial penalty of up to £5,000.

If a further breach is committed within 5 years of the imposition of a financial penalty or conviction for a previous breach this could then become a criminal offence. The penalty for the criminal offence, which is a banning order offence under the Housing and Planning Act 2016, is an unlimited fine.

Where an offence is committed, local authorities may impose a financial penalty of up to £30,000 as an alternative to prosecution.

If the landlord or letting agent fails to follow the legal guidance on the deposit cap and fees ban, it also means they cannot evict a tenant using the section 21 eviction procedure until they have repaid any unlawfully charged fees or returned an unlawfully retained holding deposit.

What happens to my security deposit once I have paid it?

Your security deposit must be placed in a tenancy deposit protection (TDP) scheme if you rent your home on an assured shorthold tenancy that started after 6 April 2007.

There are three government-backed schemes (TDS, DPS and MyDeposits) that will ensure you get your deposit back if you:

  • meet the terms of your tenancy agreement
  • do not damage the property
  • pay the rent and bills

The tenancy deposit must be paid into the scheme within 30 days of it being paid and you must be given the prescribed information regarding how, where and when the tenancy deposit has been protected.

At the end of the tenancy, the deposit must be returned to you within 10 days of you both agreeing on how much you will get back. If you have any disputes at all, the deposit must remain protected until the dispute is resolved.

What if my tenancy deposit has not been protected?

As previously mentioned above, your landlord or letting agent has 30 days from the date you paid your deposit to:

  1. Protect the deposit within one of the three authorised schemes
  2. Give you certain information about the scheme, known as the “prescribed information”
  3. Keep your deposit protected in the scheme for the whole duration of your tenancy

If the landlord or letting agent has failed to do any of the above, they could be issued with a financial penalty, paid to you, the tenant as compensation.

The first step is to contact us, and we will check to see if your deposit was protected with any of the three schemes. It will also be useful to find your tenancy agreement, which will come in handy if you decide to seek compensation – which could be worth three times the value of your deposit, i.e., a £500 deposit could total £1,500 compensation. Use our handy compensation calculator to get an estimate of what you could be owed.


Disclaimer: The information provided on this website does not, and is not intended to, constitute legal advice or a client-solicitor relationship. All information, content, and materials available on this website are for general information purposes only and should not be used as the basis for taking any specific course of legal action.