Tenant Fees Bill is tightened as cap on amount of deposit is reduced

As expected, the Government has introduced an amendment which will mean that most tenants will pay no more than the equivalent of five weeks worth of rent as a deposit.

Currently, the proposed cap is the equivalent of six weeks of rent.

It forms part of a range of amendments, including restrictions on when an agent or landlord can charge default fees.

Lord Bourne, the Government’s housing spokesman, has tabled a motion ahead of the latest report stage of the Tenant Fees Bill in the House of Lords next week that proposes reducing the cap to five weeks where the annual amount is under £50,000.

The cap will be at six weeks when the annual rent is over £50,000.

This confirms rumours, reported by EYE yesterday, that the Government wants to reduce the cap.

It has been portrayed as a victory by peers such as Baroness Grender who has been leading calls for the change.

Peers still have to back the amendment but as it has been put forward by the Government it is a signal that it is supported.

The Government has also issued an amendment stating that landlords and agents will only be able to charge default fees specifically to replace lost keys or for late rent.

The amendment suggests a default fee for late rent can be charged if it hasn’t been paid within 14 days of falling due.

Previously the Government had said it wouldn’t specify what a default fee could be charged for, but just that a receipt would have to be provided to justify the costs.

Landlords will still be able to claim back costs for damage through the tenancy deposit at the end of the tenancy, the Government said.

Another amendment also stops letting agents or landlords from taking more than one holding deposit from renters at a time.

Communities Secretary James Brokenshire said: “The amendments will make renting a home of your own more affordable, fairer and more transparent – enabling tenants to keep more of their cash and stopping unexpected costs.

“Everyone deserves a home to call their own. Yet for some renters, moving to a new house can be difficult due to high upfront costs and letting fees.

“This is unacceptable. I want to see a housing market that truly works for everyone, and one which provides a better deal for renters.”

Responding to the reduced cap, David Smith, policy director for the Residential Landlords Association, said “vulnerable and elderly tenants” will suffer from the U-turn.

He said: “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 five week cap did not offer that protection. Nothing appears to have changed since.”

David Cox, chief executive of ARLA Propertymark, added: “Once again politicians are attacking the industry for their own purposes.

“Tenancy deposits have worked perfectly well for over a decade, and there is no basis in research that these amendments are necessary.

“This move will do nothing but push the most vulnerable in our society away from professional landlords and agents, and into the hands of rogue landlords and agents who will exploit them.”

The new deposit cap was also questioned by Jon Notley, chief executive of deposit replacement scheme Zero Deposit.

He said: “While we welcome any proposed changes to legislation that will enable tenants to move more freely, it is not sensible to impose a cap that – after a single month’s rent – leaves landlords with very little protection.

“The objective in terms of improving tenant affordability is both clear and necessary but there are already services on the market that offer the same protection as a traditional six-week deposit for the landlord at the cost of just one week’s rent to the tenant. The rental market needs reform, but not in areas where solutions already exist to address its problems.”

However, there was some backing for the move from build-to-rent developer Get Living, which scrapped deposits more than a year ago.

Its chief executive Neil Young said: “We’ve proven that a well-run business can bring about trust with residents to be able to scrap deposits completely. We made this bold step over a year ago and haven’t looked back – in doing so we’ve put £3m back into renters’ pockets.

“We manage more than 2,000 homes and so have the scale and track record to know that our residents look after their homes. On average we were withholding just a small fraction of a six-week security deposit to cover damage costs. It seems unnecessary to have potentially thousands of pounds of rent sitting untouched for years.”

https://publications.parliament.uk/pa/bills/lbill/2017-2019/0129/18129-RL.pdf

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22 Comments

  1. Rayb92

    With a general election on the horizon government need to find any angle to campaign for generation rent voters .. and here we go again

    its just got even harder for DSS, pets, and other higher risk tenants .. guarantors definitely needed for our properties when this comes in

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    1. mlettings

      Absolutely agree. Its a real shame because we look at individual cases and will always assist applications for prospective tenants who have had historic issues.  Pets ; Why should a landlord take the extra risk!

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  2. The_Maluka

    Deposits should be related not to the rent but to the cost of the asset and the potential damage that can be inflicted, I would suggest 10% of the asset value.

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  3. DarrelKwong43

    NLA said the average deposit was 4.8 weeks, so unsure this will make a huge difference

    IMHO, dont take a deposit !!

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    1. PossessionFriendUK39

      ‘ Average ‘ deposit 4.8  lets just suppose this is the case for now,  as I hardly know of a reliable statistically significant study.   Means than  Many landlords don’t take a Deposit,  because they’ve been ( wrongly ) frightened off by the legislation, all the non-sense around Superstrike   etc ( albeit that’s now resolved with De-reg Act.

      Clearly, there are some properties, or tenants that ose such risk,  that Landlords must be asking substantially above 4.8 –  to make that an Average.

      Who the hell are the government to interfere in the risks of Private business. –  should be taken to ECHR.

      Its nothing more that Vote – posturing,  shame. !

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      1. Property Poke In The Eye

        Exactly who are the government to interfere in risk assessment and also who are they to dictate to business what someone’s hourly rate should be.

        This is not a free market anymore.

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  4. Eric Walker

    A big boost for deposit replacement schemes.

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  5. CountryLass

    Well, good luck finding a landlord willing to rent to someone with pets then! Or receiving housing benefit. Or with a less than perfect Landlord reference.

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    1. Will

      Precisely!

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  6. Will

    Oh dear what foolish people we have in Government and many so called housing charities. All they are doing is making it more and more difficult for the poorer renters.  So as a landlord, I will not be able to charge referencing fees – this will make me even more careful who I choose to put forward for referencing.  I will need to do a pre-reference to reduce my risks of an applicant wasting my  money on the referencing riskier applicants.  As the PM keeps telling us no deal is better than a bad deal!

    I will not be able to decided what level of deposit I need to take. In the past if an applicant was a higher risk I might have considered letting them in with a higher deposit – so that one is now going to be out of the window!  Again bottom end tenants are the ones likely to be affected.  So the result is the Government’s policy of tightening up will affect how I need to tighten up my own risk assessments.  This will also  impact even greater on Benefits tenants as I will need to ensure prospective tenants meet higher standards to protect my investment.  Of course, as Government’s punitive taxation and increased regulation driven by Shelter and the likes continue landlord bashing they are effectively reducing supply as profitability is eroded, or in many cases driven into losses, supply will fall.  The rogue sector that tar good landlords with the same brush will find opportunities because they don’t comply with the law, and we see councils allowing overcrowding and poor conditions where they cannot find/afford decent housing at the price THEY WANT TO PAY rather than what the market sets.  So the rogue element will survive whilst us good landlords suffer the spin off and bad publicity from the rogues that Government have encouraged.

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    1. davehedgehog

      As a landlord…..In a nutshell.

      I was in between buying a property a few years ago and was happy to pay an extra damage deposit for my dog but that was maybe because i respected my landlord and his property. Oh and I got all my deposit back

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      1. Will

        Most of my tenants do get their deposit back but I choose carefully but this is about risk management which the foolish and idiotic MPs and charities choose to ignore because its not THEIR loss, its some else’s loss. Pure selfishness. Clearly you are one of the good guys as indeed are the majority of tenants.

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  7. Lil Bandit

    Would this apply to deposit replacement products as well? A few of them have more than 6 weeks cover?

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  8. Deltic2130

    Well done government! All it means for me is no letting to anyone who isn’t absolutely perfect, with copper-bottomed guarantor attached. No more will I let rent payments slide to assist poorer tenants, no more will minor damages be overlooked. And those rents? Well, I wasn’t going to take advantage of the extra £50/month of headroom I had, but I will do so now!

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    1. Deltic2130

      And how does Get Living chase its arrears and damages then? Or are they just tub-thumping for more BTR?

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      1. Will

        Who cares Get Living are entitled to their own business model and this does not mean it has to be everyones nor does it mean it is right!  They are just advertising.

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  9. landadvice28

    Given that some tenants wish to leave during a fixed term, a landlord is going to be unwilling to pay for Right to rent checks and further deposit protection, the issue of a new AST and its mountain of paperwork. Such landlords will probably exercise their legal right to hold the tenant to pay until the end of the fixed term of the tenancy.

    Good old wise government, skilled in joined up thinking!!!!!!!

    Dave Absalom

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    1. Jim S

      I deal with student properties and they are constantly wanting to leave their contracts early ie within the “fixed period” due to failing university, falling out with their co tenants, and just wanting to leave. Carrying out a re sign up for a group of 5/6/7/8 students is a lot OF HARD WORK! and they usually they have to come in for the sign up in two visits. I will NOT be doing the sign up for free and as I will not be able to charge the tenants, then the tenant will have stay locked into their contract which will cause them problems. This isn’t something that just happens every now and then, it happens all the time and it’s a real pain.

      So I will be also be expected to re protect deposits and pay for the costs in doing so. The only way I can think of to get around this will be to start the new/re sign up tenancy at a higher rent that will include my sign up costs of £250.00 into the new rent for the remaining number of months of the new tenancy. This means that the tenant who leaves and causes the resign up will get off without having to pay anything and the new/other existing tenants will end up in effect paying for that persons default charge.

      Can someone tell me what is wrong with charging for a default charge?

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  10. jeremy1960

    The irony of all this government’s posturing and positioning to garner votes at the next GE is that most of the people that they want to attract won’t even bother to get out of bed to vote! Whereas the landlords, who have traditionally been supported by the “blues” will now be left with a stark choice, vote blue again and waste a vote, vote red and get shafted more, vote any other colour and end up in the blue or red camp by default according to whichever offers the largest brown envelope for their support!

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  11. Jireh Homes

    Government appears to have ignored the concept behind deposit schemes, which are to cover any default on rent and claims against condition of property at termination of lease.  Where tenants were unable to pay the full six week deposit in advance, I have accepted stage payments over the early months of a lease and lodged as received.   Equivalence of six weeks was marginal, preferring eight weeks, and now five weeks raises the risk for the landlord, potentially restricting the selection of tenants or requesting more than one months rent in advance.  With deposit schemes, tenants are protected from unreasonable claims, but the landlord only to the amount lodged (which with low rents may not be enough to cover any serious claims), unless resort to chasing guarantors or through the legl system..

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  12. Woodentop

    Maybe Lord Bourne & Baroness Grender would like to explain how they came by 5 weeks? As just about all landlords and lettings agents have not been consulted this is nothing more than a personal agenda and an abuse of power?

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  13. Jim S

    So the Government did a U turn at the last minute on what they had proposed during discussions with industry professionals about the tenant fees ban, they changed play at the last minute banning a whole load of default charges and limiting the deposit to 5 weeks rent. The worst part for us is that we will not be allowed to charge the tenant when they want to leave the contract early or for changing tenants. It’s bad enough with students wanting to leave their tenancy early as it is but once they realise that they can do it for free then you can probably quadruple the number of times that it will happen.
     The holding deposit has also been limited to 1 weeks rent and you can only hold it for 15 days, so we will not be able to use this document any more where we have waited several months for part of an existing deposit to come back to us from an existing tenancy so that we could add it to the new part holding deposit/deposit. We are now going to have ask the new tenants/existing tenants for a completely new deposit that will have to be paid in full as we cannot wait. So much for the Government wanting to make it easier for tenants to access accommodation, I don’t think that they thought that one through!

     If anyone is including services in their contract now for additional cleaning, gardening or even payment of utility bills that would be paid outside of rent, then beware of the proposed implementation dates as the tenant will not have to pay for those services. See quote from the RLA below:
     Will the fees ban apply to older tenancies?
    Not immediately. It will apply to renewals of tenancies, excluding statutory and contractual periodic tenancies that arise after the Tenant Fees Act comes into force. After one year the ban will attach to pre-existing tenancies and clauses that charge fees in them will become ineffective.
    https://www.rla.org.uk/landlord/guides/tenant-fees-ban-guidance.shtml

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