Security Deposit – Renting
Are you a landlord renting out your property to a tenant? Well, here’s what you need to know.
The Tenant Fees Act (TFA) was introduced on the 1st June 2019 and applies to all assured short hold tenancies, tenancies of student accommodation and licenses to occupy housing in the private rented sector in England. The aim of the Act is to reduce the costs that tenants can face at the outset, and throughout, a tenancy.
However, applying the Tenant Fees Act to various types of letting agreement can be complicated. It is essential that particular attention is paid to the date that a tenancy was granted either expressly or by operation of law, and the date the security deposit was paid. Due to the TFA, any deposit now paid is subject to the tenancy deposit cap.
Security deposits will be capped at five weeks’ rent where the annual rent is less than £50,000 and six weeks’ rent where the annual rent is £50,000 or more. This means that for example if the monthly rent you are charging a tenant is £1,500.00, they pay less than £50,000.00 rent annually. Thus, you should not charge your tenant more than £1,875.00 as a security deposit because this amounts to the cost of five weeks rent. Any amount taken in excess of the cap is a prohibited payment and you as a landlord will be in breach of the Act and this could cause problems should you wish to evict a tenant at some point in the future.
A tenancy renewal may trigger the application of the tenancy cap for the first time but where the landlord holds a deposit that exceeds the cap they will have to return the surplus amount to the tenant. However, if a higher rent is agreed on renewal, then the deposit cap will need be re-calculated on the basis of the new rent.
When entering into a new tenancy agreement, it is always advisable that you retain clear records to demonstrate compliance. The TFA has made significant changes to the rules surrounding tenancy agreements and it is essential that all parties are aware of their rights from the outset.
If you are a landlord dealing with a dispute with your tenant and you would like some advice, please contact Garden House Solicitors at 01992 422 128.