I’m a first time landlord (since April 2019) have an Open Rent rental contract with my tenants that runs until the end of March 2021, with a deposit that is currently above the equivalent of 5 weeks rent. The deposit amount is clearly stipulated in the rental contract.
Am I correct in understanding that I need to initiate a deposit reduction & refund of the balance by June 2020, to reduce it the the equivalent of 5 weeks rent? At the same time, I assume that we need to amend the rental contract - is everyone doing this too, and are you doing a side letter, or how are people handling this?
Advice much appreciated! Thank you very much,
Claire
Yes, you will need to make sure the deposit is five weeks’ rent or less before 1st June 2020. You also need to do this if you renew your existing tenancy before 1st June 2020. [Edit: This was wrong.]
You don’t necessarily need to amend your tenancy agreement. But if you renew, then the agreement should describe a compliant tenancy deposit value and a compliant deposit should be registered.
The method for repaying a partial deposit amount depends on scheme provider and whether the deposit is held in an insured or custodial scheme.
I have just written a quick guide to DPS and plan to do the same for MyDeposits and TDS.
Thousands of landlords will be going through the same thing as you, so I’m sure other users will pop in here with help and tips.
Thank you Sam! Why wouldn’t I need to amend the tenancy agreement though, as the deposit amount on it will then be incorrect? This feels odd - to return money, but it would still state that I hold a higher amount on a contract that would still be valid (I don’t need to renew the tenancy until 2021).
I am not a legal expert and if you want a definitive answer on this then I can point you in the right direction.
But my understanding is that:
the deposit value specified on your tenancy agreement describes the value of the deposit you took and registered at the start of the tenancy
from that point on, the deposit scheme is the correct place to find information about the state of the deposit
if the amount on the tenancy agreement is not compliant (i.e. because it is more than 5 weeks’ rent) then that would not be lawful anyway, and therefore would not be enforceable, so the term describing the old tenancy deposit would become meaningless
Many tenancy agreements contain clauses written by agents or landlords that are not actually compliant with regulations, but that does not mean that the tenancy is invalidated. It just means that that part of the agreement can’t be enforced.
Hi Claire, I just wanted to get in touch to say that I was wrong about one part of my answer. You only need to return the excess deposit if you are renewing the tenancy. The 1st June 2020 deadline does not apply to deposits, although it still does apply to other fees. I.e. you will not be able to charge any tenant fees from 1st June 2020 even if they are in your tenancy agreement.