What Is the Maximum Tenancy Deposit?
From summer 2019 landlords have been forbidden to take more than five weeks rent as a deposit from new tenants renting their property. Prior to this it wasn’t uncommon for a landlord to ask for two month’s rent as a deposit.
The only exception to the new ruling is for landlords of properties where the tenants will be paying more than £50,000 a year in rent. In which case landlords are allowed to take a deposit of up to six weeks rent.
How Much Is the Average Tenancy Deposit?
Five weeks rent – which the majority of landlords here in the UK will take as a tenancy deposit – is an awkward sum to calculate. The best way to do so is to take your monthly rent and multiply it by 12 to get the annual rent. Next divide this by 52 and you will end up with the weekly rent. Now all you have to do is multiply the weekly rent by five.
Another way to come to the same figure is to get your monthly rent and multiply it by the rather bizarre figure of 1.15385 (obviously using a calculator in the process!).
What Is the Maximum Deposit on a Rental Property?
The Tenant Fees Act also introduced new limits for holding deposits. From the same time period (ie June 2019) landlords have only been allowed to take a maximum of one week’s rent as a holding deposit (ie as a promise that the tenant wishes to – and will – rent the property).
This is certainly much less than many landlords will have been used to taking as a holding deposit. However, the House of Lords judged that it would still be a fair amount of money for a prospective tenant to lose if they didn’t go ahead and rent the property in question. For instance, a flat renting out at £2000 a month would result in a prospective tenant not going ahead with the tenancy, losing his or her holding deposit of around £500.
Deposit Protection Scheme
When it comes to registering your tenant’s deposit with one of the accredited Tenancy Deposit Schemes, you can just do this in the same manner as you did for any previous tenants. In other words, although the maximum deposit you can take from your tenants has changed, the means of depositing the sum hasn’t.
Note too that the Tenancy Deposit Schemes are different depending on which country your property is in – Scotland and Northern Ireland having their own accredited bodies.
So, like before, deposit the money within 30 days of its receipt and let your tenants know in which scheme their cash has been deposited. Failure to do so means you won’t be able to carry out a property eviction should you wish to at a later stage. And, to add to your misery, you will also be fined at a rate of three times the amount of the deposit. As a landlord it certainly pays to be organised and keep up with changing legislation.
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