Deposit Cap and the Tenant Fee Ban - ENGLAND ONLY

From 1st June 2019 landlords in England will be limited to 5 weeks' deposit for new and renewed tenancies (or 6 weeks if the annual rent is £50,000 or more).

There will also be limitations on what landlords and agents can charge tenants.

We have put together this resource centre with all you need to know about the impending changes.

Please note that some aspects of this change are not yet finalised, and we will update this page regularly as and when we learn of developments, so please check back regularly, or sign up to our Deposit Cap Bulletin to be alerted when we add new guidance.

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  • Introduction to the changes
  • Timeline
  • Before vs after
  • Example scenarios
  • How to reduce your
    TDS Insured deposit
  • How to reduce your
    TDS Custodial deposit
  • Guidance documents
  • Request a demo
  • Introduction to changes

    The Tenant Fees Act 2019 comes into effect on 1st June 2019 applying to all agents and landlords in England. The Act limits the amount a tenant can be charged for a holding deposit and security deposit and defines what a tenant can be charged in addition to rent.

    Certain fees and charges are permitted under the Act, whereas others are defined as prohibited payments. You can find out more on this under our ‘Before vs after’ tab in the left hand menu.

    The main changes include:

    • Capped holding deposits and set timeframes for repayment;
    • Capped security deposits;
    • A set list of permitted payments which can be taken during the tenancy; and
    • A set list of prohibited payments which cannot be charged under the Act in any circumstances.

    This resource centre includes all the information and guidance agents and landlords in England need to comply with the legislation and understand the changes made. We’ve also included a section on how to repay deposits which exceed the cap in the event that you renew a tenancy agreement from 1st June 2019.

    Here’s an overview of the changes made by the legislation:

    • Holding deposits are capped at one week’s rent;
    • 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;
    • Default fees (fees which can be charged during the tenancy) are limited to the reasonable costs incurred in replacing a key or lost security device or interest on rent overdue by 14 days or more, capped at 3% above the Bank of England base rate.

    Timeline

    2nd May 2018: The Bill entered the House of Commons for first reading. 

    12th February 2019: The Bill received Royal Assent.

    1st June 2019: The Act comes into force meaning all new tenancy agreements, or renewed tenancies arising on after this date, will be subject to the provisions of the legislation.  Agents and landlords can continue charging fees on tenancies which came into effect before 31 May 2019 until 31 May 2020.

    1st June 2020: The one-year transitional period comes to an end meaning the legislation is binding all on tenancies, even those which commenced before the legislation came into effect (although you do not need to reduce the deposit below the cap unless you enter a new fixed term tenancy agreement.

    Deposit cap timeline

    Before vs after 1st June 2019

    DeductionPre Tenant Fees Act
    Post Tenant fees Act

    Holding deposit

    Uncapped with no legal requirements around the timeframe to return during tenancy.

    Capped at a maximum of one week's rent. The holding deposit must be refunded within 7 calendar days of the tenancy not being entered into (unless it's agreed to be used towards rent or the security deposit) or 15 calendar days from receipt of the deposit deadline being reached.

    Security deposit

    Uncapped.

    The refundable tenancy deposit is capped at no more than the equivalent of five weeks' rent where the annual rent is less than £50,000, or six weeks' rent where the annual rent is £50,000 or more.

    Pet deposit

    Frequently taken in addition to the uncapped security deposit when a landlord accepts a tenant's request to keep a pet during the tenancy.

    The total deposit taken cannot exceed five or six weeks' rent (as set out above). This means that if you have taken the maximum security deposit, the agent or landlord cannot take any further monies towards a pet deposit.

    Interest on rent

    Uncapped.

    An agent or landlord can charge interest on rent which is more than 14 days overdue. This can be charged at a maximum of 3% above the Bank of England base rate.

    Late payment of rent fee

    Charged when a tenant falls into arrears due to the administration costs involved in pursuing payment from the tenant.

    Prohibited under the Act.

    Deposit deductions for dilapidations

    Charged where the tenant breaches an obligation under the agreement. Evidence must be provided to show an obligation has been breached, that the deposit can be used for the breach, and a loss has been suffered.

    Agents and landlords will still be able to make deposit deductions for breach of obligations. As is now, evidence must be provided to show an obligation has been breached, that a loss has been suffered, and that the deposit can be used against that loss.

    Deposit deductions for rent arrears

    Charged at the end of the tenancy where the tenant has fallen into arrears, as long as the tenancy agreement obligates the tenant to pay the rent and the deposit-use clause allows for it to be used for rent arrears.

    No change - this can still be claimed.

    Check-in/check-out fee

    Sometimes one fee is paid by the landlord and the other is paid by the tenant, with the cost bing passed on to the tenant through a contractual obligation.

    Prohibited under the Act.

    Early termination costs

    Often charged to the tenant in the event that they vacate the property before the end of the fixed term.

    Agents and landlords can charge an early termination fee which does not exceed the financial loss that the landlord has suffered in permitting the tenant to leave early, or the reasonable costs that have been incurred by the agent in arranging for the tenant to leave early.

    Payment for changing or assigning a tenancy where requested by the tenant

    Uncapped.

    Capped at a maximum of £50 unless the landlord can show that greater costs were incurred.

    Lost keys

    Uncapped.

    Permitted under the Act but restricted to the reasonable cost of replacement.  

    Example scenarios

    Example 1: Loss of key or security device.

    The tenant loses a key during the tenancy and is charged for replacement.

    Is this a permitted payment?What action can be taken?
    What evidence is required?

    Yes.

    Reasonable cost of replacement is allowed.

    Legal action to recover is possible during tenancy.

    Claim against deposit can be made at end of tenancy.

    If disputed, can be referred to TDS or Court.

    Invoice and evidence to show reasonable, e.g. comparable quotations.


    Example 2: Interest on overdue rent

    Rent is not paid for more than 14 days, interest is charged under terms of tenancy agreement.

    Is this a permitted payment?If it is unpaid or disputed, what further action can be taken?
    What evidence will be required?

    Yes.

    Limited to 3% above Bank of England base rate.

    Interest calculated on a daily basis from the date when payment should have been made until the date payment is made.

    Legal action to recover is possible during tenancy.

    Claim against deposit can be made at end of tenancy.

    If disputed, can be referred to TDS or Court.

    Rent statement including interest calculation.


    Example 3: Fee for making changes to a tenancy after it has been entered into

    Permission is granted to a tenant to keep a pet after the tenancy agreement was entered into.

    Is this a permitted payment?If it is unpaid or disputed, what further action can be taken?
    What evidence will be required?

    Yes.

    Fee is limited to the greater of:

    (a) £50.00 inc. VAT or

    (b) the reasonable cost of making the change to the tenancy agreement.

    Legal action to recover is possible during tenancy.

    Claim against deposit can be made at end of tenancy.

    If disputed, can be referred to TDS or Court.

    Invoice, and evidence to show reasonable if over £50.00.


    Example 4: Early termination fees (other than in relation to the exercise of a break clause)

    Agent/landlord agrees to early termination on the condition that replacement tenants are found. Costs include those associated with re-advertising the property or referencing new tenants, payment of rent until the new tenancy has started and rent payments that the outgoing tenant should have paid to the extent that the replacement tenant will be paying a lower amount.

    Is this a permitted payment?If it is unpaid or disputed, what further action can be taken?
    What evidence will be required?

    No.

    No legal action to recover is possible during tenancy.

    Claim against deposit can be made at end of tenancy.

    If disputed, can be referred to TDS or Court.

    Rent statment, fee invoice, and evidence to show reasonable.


    Example 5: Breaches of tenancy agreement

    Tenant fails to clean property to a professional standard as required by terms of tenancy agreement. Check-in and check-out report confirm cleaning shortfall.

    Is this a permitted payment?If it is unpaid or disputed, what further action can be taken?
    What evidence will be required?

    During the tenancy, no.

     

    No legal action to recover is possible during tenancy.

    Claim against deposit can be made at end of tenancy.

    If disputed, can be referred to TDS or Court.

    Estimate or invoice. The amount claimed must be reasonable and the landlord must do what they can to keep that loss to a minimum.


    How to reduce your TDS Insured deposit

    After you have returned the excess deposit to the tenant(s), follow these steps to update the deposit protection.

    Step 1

    Find the deposit in your dashboard and select 'Edit Tenancy Details'.


    Step 2

    Enter the new deposit amount and monthly rent amount for the new tenancy agreement and select 'Update tenancy'. 


    Step 3

    Select 'End Tenancy'.


    Step 4

    Under the section asking how the tenancy ended, select 'Renewed' then 'Submit'


    Success! 

    The protected amount is now updated - you do not have to do anything more.


    How to reduce your TDS Custodial deposit

    Step 1

    Find the deposit in your dashboard and select 'View/Edit'.


    Step 2

    Select 'Edit' from the deposit details page.


    Step 3

    Enter the new deposit amount and rent amount for the new tenancy agreement and select the rental period. 


    Success!

    We will now contact the tenant for their payment details - you do not need to do anything more.

    Guidance documents

    Guide to TDS' Deposit Cap Solution

    We have developed functionality to reduce the deposit in the Custodial Scheme and repay the excess to the lead tenant, and to update the protected amount in the Insured scheme, where you have repaid the excess directly.

    Our guide to our Deposit Cap Solution outlines how members of each scheme can reduce the deposit using our deposit management system.

    Tenant Fees Act 2019 Guidance for Landlords and Agents

    Tenant Fees Act 2019 Guidance for Landlords and Agents have been prepared by the Ministry of Housing, Communities and Local Government to help inform landlords and letting agents of their rights and obligations under the Act, including: a list of permitted and prohibited payments, and consequences of a breach of the Act.

     

     

     

     

     

     

     

     

     

    Tenant Fees Act 2019 Explanatory Notes


    These Explanatory Notes have been prepared by the Ministry of Housing, Communities and Local Government in order to assist the reader in understanding the Act. They do not form part of the Act and have not been endorsed by Parliament.

     

     

     

     

     

     

     

     

     

    Tenant Fees Ban Matrix:

    An easy-to-understand matrix explaining the differences between the Tenant Fees Act 2019 in England and the Renting Homes (Fees Etc.) (Wales) Act 2019.

    You can view the Tenant Fees Ban Matrix here. 

     

     

    Request a demo

    Not a TDS member? Learn more about TDS' service and systems with our free demo, with no obligation. In addition to our deposit cap solution, we'd love to show you some other time-saving functionality unique to TDS. This can be at your offices, or we can arrange a remotely using our screen-sharing application.

    Learn more on our Joining Pages, or request a demo below.