skip to Main Content

Landlord Switch Scheme

Switch your property over to Maylark and receive a £50 Amazon Voucher.

The Deposit Cap – Do you need to refund your tenants?

The Deposit Cap – Do You Need To Refund Your Tenants?

The Tenant Fees Act 2019 (England) came into effect on 1 June 2019 and made sweeping changes to the letting industry, however unlike the name suggests there are other parts to the legislation that are not directly linked to tenant fees.

One such area relates to the amount of security deposit a landlord can take at the start of a tenancy, being limited to 5 weeks rent where annual rents are below £50,000 and 6 weeks rent where annual rents are in excess of this.

The ruling also affects existing AST’s (Assured Shorthold Tenancies) which were entered into before 1 June 2019 and their associated security deposits, because these traditionally equated to 6 weeks rent and, in some cases, could include additional deposits, for example for pets.

The ruling states that when renewing an existing AST which was entered into before 1 June 2019, the deposit needs to reflect these legislative changes or if it is a periodic agreement i.e. one running month to month then the deposit cap needs to be adhered to by the latest 31 May 2020.   This may mean that part of an existing deposit needs to be returned to the tenants.

Example – a 12 month tenancy was entered into on 1 January 2019 with a rent of £1,000.00 per month and a security deposit of £1,384.61 (6 weeks rent) was taken.  If the tenancy renews for a further period from 1 January 2020 then a part of the deposit needs to be returned to the tenant at this time, leaving the equivalent of 5 weeks rent (£1,153.84).

A breach of the Tenant Fees Act can result in a civil offence with a fine up to £5,000 and if there are consistent breaches of the Act then further criminal or civil penalties can be imposed.

Maylark, like many other reputable Letting Agents, have implemented processes for handling the changes needed, but self-managing landlords need to be aware of this ruling and how and when they need to make changes to their new or existing tenancies.

Should you be one of these landlords with rental property in Crawley or the local surrounding area we would be happy to discuss this with you further.

Back To Top