What Is the Maximum Deposit a Landlord Can Take?

Written By PropertyLoop
February 15, 2021

To the delight of tenants that already have many overheads and upfront costs to renting, there is a maximum deposit amount a landlord can request from their new residents.

What Is the Maximum Deposit a Landlord Can Take? PropertyLoop

What Is the Maximum Deposit a Landlord Can Charge? 

With the introduction of the Tenant Fees Act coming into effect back in June 2019, a threshold was established for the amount owners are able to take from their tenants towards a tenancy deposit. The tenant fees act states that the amount a landlord is legally empowered to ask the occupants of their rental property to pay for a deposit is dictated by the amount paid each year n rent.  

Providing that the annual rental charge for the property is under £50,000 then the landlord is able to request a maximum of five weeks rent for the tenancy deposit. However, if the amount the tenant pays each year in rent exceeds this amount, landlords are able to demand as much as six weeks rent for the security deposit.

What Is the Tenancy Deposit Scheme? 

Once a tenant pays their landlords a security deposit, the owner of the property is legally required to enter these amounts into a government-backed tenancy deposit scheme. These schemes will then safeguard any amounts paid by the tenant for the tenancy deposit, alongside helping to resolve any disputes that may arise regarding deductions to the amount that will be refunded come the end of the tenancy.  

Landlords are obliged to enter the tenancy deposit into either a custodial, or insurance-based protection scheme, with the key distinction being the party that physically holds the sums paid by the renter. Providing that the landlord chooses to protect the deposit through a custodial scheme, the landlord will not be in possession of the sums during the tenancy, however, with an insurance backed scheme, the landlord maintains possession of the deposit until the end of the fixed term, allowing the scheme to refund the appropriate amounts to the tenant.  

Is It Illegal for a Landlord Not to Protect the Deposit?   

It is essential for rental property owners to note that they are legally required to protect their resident’s tenancy deposit. If a landlord neglects to enter the appropriate sums into a deposit protection scheme, then the repercussions can be severe, seeing them potentially pay the tenants up to three times the sums provided for the deposit in compensation.  Further to this, owners must provide their tenants with confirmation that the sums have been protected, making clear the amount entered into the scheme, the name of the protection scheme, the property being let and the conditions for deductions to be made from the amount that could be refunded.  Additionally, if the landlord has failed to protect the tenancy deposit, they will be unable to reclaim possession of the rental property through serving their tenants with a section 21 order, until the deposit has been either repaid or protected.  

What is the maximum deposit a landlord can charge UK? PropertyLoop

When to Pay Deposit on a Rental Property? 

Similarly, to the holding deposit, aspiring renters will be required to pay their landlord the tenancy deposit prior to moving in. The tenancy deposit will be required once the terms of the tenancy have been stipulated and both parties have signed an agreement.  

Can a Landlord Ask For More Than the Deposit?   

Through the enforcement of the Tenant Fees Act 2019 landlords are strictly prohibited from requesting that their tenants pay more than the threshold established by the regulations. If a landlord is found to be in breach of the Tenant Fees Act their local authority will be able to impose a fine to the amount of £5,000 for the first offence, with any following breaches of the act within five years being met with a £30,000 penalty.  

With this being said it is important to note that owners may ask for other payments alongside the deposits before a tenant moves into the property. In recent times an increasing number of rental property owners have been requesting their tenants pay rent in advance. It is essential that any upfront rental payments are distinguished from any deposits paid, with the landlord providing receipts for any monitory exchanges that take place.  

PropertyLoop is the world’s first commission free lettings platform. Our platform allows landlords to advertise their rental, reference tenants, curate an agreement, register the deposit and collect rent completely for free! There are no hidden charges, upfront fees or any catches.    

Built by experienced property investors and landlords, PropertyLoop connects renters with the owners directly. Your property is featured on all major search and comparison portals as well as advertised by PropertyLoop everywhere else on the Internet. You don’t have to worry about finding the good renters, that’s the job for the platform. Receive offers straight to your mailbox and select the renters that are right for your property. Need access to busy London property market? No problem at all! PropertyLoop is the London market specialist with years of experience and unique knowledge. Whatever your needs are, you can always speak to friendly support staff. Renting property is made as simple as one, two, three. 

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