Mar

LATEST: Landlords do not have to return deposits for ongoing tenancies signed BEFORE June 1st last year

admin

The tenant fees ban and its five-week cap on deposits does not come in fully for all tenancies until later this year, landlords should note.

Government authorised tenancy deposit protection
provider mydeposits
has reported a rise in calls from landlords and agents who mistakenly believe
all deposits must comply with the cap by the end of the Tenant Fees Act
transition period on 1 June 2020.

Some of this confusion could be due to an article
from the DPS, which incorrectly states that all three of the Government
authorised tenancy deposit schemes advise that deposits over the cap amount
should be returned to the tenant, including
for tenancies entered into before 1 June 2019.

The deposit cap, which was introduced under the
tenant fee ban last June, set a cap on the amount that can be taken as a
security deposit (five week’s rent for tenancies where the total annual rent
for the property is less than £50,000 per year, six week’s rent where the total
annual rent for the property is between £50,000 and £100,000 per year).

Rental cap

But the cap does not
apply to on-going tenancy agreements signed before 1 June 2019.

If the tenancy agreement was signed before that date
and rolls into a statutory periodic tenancy, then the deposit does not need to
be reduced until it ends or is renewed, and a new tenancy agreement is signed.

At this point the deposit cap will apply and any
excess deposit must be refunded.

This wasn’t clear in the Government guidance on the
transition period, which came out quite late, but has now been clarified in the
Government’s updated Tenant
Fees Act 2019: Guidance for landlords and agents.

Head of Dispute Resolution at mydeposits, Suzy
Hershman, explains: “We’re advising our landlords and agents that if the
deposit was taken before 1 June 2019, and the tenancy is ongoing, the deposit
cap does not apply.”

Hamilton Fraser’s new helpline for letting agents, HF Assist,
has also received several calls from letting agents, confused about whether
they have returned all surplus deposits in advance of the impending transition deadline
of 1 June 2020.

HF Assist Project Consultant, Mike Morgan, comments:
“While it’s encouraging that so many agents are getting organised, we have been
surprised by the calls we are getting on this.

“We’re advising agents that, as well as checking
which deposits are over the cap, they need to make sure they check the history
of the tenancy too. Knowing when the tenancy started and is ending is key.”

In a nutshell

By reducing the cap and refunding a proportion of
the deposit to their tenants unnecessarily, landlords and agents are leaving
themselves with less protection than they would have had against bad tenants.

Pet point

Any landlords and agents who took a pet deposit before the tenant fee ban came into force will have to refund the deposit when a new tenancy agreement is signed, as this is no longer permitted under the tenant fee ban. For more information, read the Government’s guidance on the Tenant Fee Act, or you can access mydeposits guidance here . Please note this advice applies to England only.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – LATEST: Landlords do not have to return deposits for ongoing tenancies signed BEFORE June 1st last year | LandlordZONE.

View Full Article: LATEST: Landlords do not have to return deposits for ongoing tenancies signed BEFORE June 1st last year