A cap on tenancy deposits could lead to more disputes says industry trade body

August 24, 2017

As part of the Queen’s speech earlier this summer, the Government unveiled its draft Tenants’ Fee Bill which included details of issues such as a cap on holding deposits and security deposits and the impending ban on letting agent fees that tenants are charged.

The proposal is that holding deposits are capped at no more than one week’s rent and the security deposit no more than one month’s rent down from the current level charged by landlords of up to two months.

A full draft of the Tenants’ Fees Bill is expected to be published later on in the year, with legislation being introduced at some point in 2018 however the regulatory trade body, the Association of Independed Inventory Clerks (AIIC), claims this could lead to an increase in formal deposit disputes.

Although this cap will help tenants during the initial stages of rental, the lower sums required could lead to an increase in the number of formal deposit disputes. These occur when tenants and landlords disagree over proposed deductions taken from the deposit following the end of a tenancy.

‘A cap on security and holding deposits is certainly more positive than an outright ban as has been proposed for up front letting agent fees charged to tenants,’ said Danny Zane, joint chair of the AIIC.

The AIIC is concerned that as tenants will be committing less money to deposits, they may take a more laissez faire approach to the property they are renting and therefore landlords might be left with more damage and repairs to deal with. As a result landlords could be more likely to make deductions from tenants’ deposits. If a renter challenges these deductions, this could lead to a dispute.

Some landlords charge higher deposits in order to allow pets or to cover high ticket furniture items. This cap on deposits could stop them being able to do so and discourage landlords from letting or adversely affect the standard of private rental properties.

The AIIC stresses that an independently compiled inventory is an integral part of the rental process for landlords which can significantly reduce the chances of a deposit dispute.

“An impartial, professional inventory comprehensively details the condition and contents of the property at the start and end of the tenancy. They help to protect tenants from unfair charges and can also stop landlords being left out of pocket,” added Zane, who is also managing director of My Property Inventories.