As a matter of course, we have taken 2 months deposit for years on new lettings. Our tenants have never complained as we explain that, if there is any damage at the end of the tenancy, one months deposit is unlikely to cover it.
Does anyone know if we will have to reimburse the difference between 5 weeks and 2 months deposit after 1st June 2019 for existing tenancies?
As I understand it (and it does make sense) the 5 week deposit cap will only apply to new or renewed agreements that are effective from 1st June '19 and thereafter. Therefore, you will not be obliged to pay back the difference. However, it is good practice, especially on long term tenancies, to “top up” the deposit, usually in line with rent reviews. Otherwise, the rent coverage reduces with each rent increase. Whether a Landlord will be allowed to continue to do this if the tenancy is a pre-regulation agreement and the original deposit was for say 6 weeks rent, as is (soon to be “was”) the norm. In the future, Landlords may only be allowed to “top up” when the protected deposit reduces to the equivalant of 5 weeks rent. Let’s hope not!
Hi both (@Sarah7) - Good question here that a few users have raised via various channels.
Clive is right that the new laws only apply to new tenancies from 1st June 2019. From 1st June 2020, they will apply to all tenancies, but it’s not clear that this applies to deposit payments already made.
I’m going to try and get a definitive answer on this from someone official…
Sarah you’re quite right that one month’s deposit is unlikely to cover most serious damage. The average monthly rent is around £800, meaning even two months’ rent is unlikely serious damage, should it occur.
It’s clear, really, that the tenancy deposit exists more as a psychological financial deterrent to tenants than as an effective piggybank for landlords to dip into to fix serious property damage.
Please can you explain Openrent’s procedure for returning tenants’ deposit over the maximum 5 week limit?
As the government’s guidance explains, landlords and lettings agents are required to repay anything over 5 weeks held as a deposit for fixed term contracts which are renewed from 1 June 2019.
This can be found on page 40 of the government’s advice here:
Thanks for the opporunity to be clear about this confusing situation.
The Government guidance makes it clear that landlords and agents are not required to repay excess deposit amounts before 1st June 2020.
Here is an excerpt from the same Government guidance document.
I hope this makes things clear!
As I said before, that document makes clear that landlords must repay any amount over 5 weeks rent held as a deposit if a contract is renewed from 1 June 2019 (because a renewed tenancy then becomes a new, separate tenancy which the cap applies to). The extract you attached refers only to continuing tenancy agreements that were signed before 1 June 2019 - in this case the landlord does not have to return any deposit held over 5 weeks as the cap does not apply.
However, any tenancies which precede 1 June 2019 but which are renewed after this date become new tenancies and the cap therefore applies to them. In this case, the landlord is legally required to return any amount held over a 5 week reposit to the tenant.
My question is what is Openrent’s procedure for this situation, where the landlord, property and tenant remain the same, but they enter a new tenancy (such as by renewing the tenancy for another fixed term) and therefore the landlord is not permitted to hold anything over a 5 week deposit and must return this? (This situation and requirement is explained in the second paragraph of the extract I attached to my first post.)
Hi Imogen, OK so your question is what should landlords who have used OpenRent’s Rent Now tenancy creation service to create their tenancy do if:
- they have a tenancy deposit over 5 weeks rent
- for a tenancy which commenced before 1st June 2019, and
- are renewing the tenancy after 1st June 2019
The answer is that they should return the excess deposit amount so that upon renewal, the value of the deposit does not exceed the value of 5 weeks of rent.
During Rent Now, OpenRent protects the tenant’s deposit on the landlord’s behalf. The deposit protection certificate will be in the name of the landlord. Landlords must initiate the repayment.
I wrote a guide last year on how landlords (OpenRent or otherwise) can make partial deposit repayments. The guide covers what to do for all three scemes (MyDeposit, TDS, DPS) and both kinds of deposit (custodial and insured).
Let me know if you have any further questions.