How to Calculate Five Weeks’ Rent for the New Deposit Cap

deposit cap
deposit cap

How to Calculate Five Week’s Rent for New Deposit Cap

On 1st June 2019 a new tenancy deposit cap will be introduced, as part of the Tenant Fees Bill in England.

From then on, landlords will only be able to require a maximum security deposit of five weeks’ rent and a holding deposit of one week’s rent.

Measures are being put in place to regulate the fees charged to tenants by letting agents. This will also include the abolishment of most upfront fees. With this in mind, we wanted to provide some tips on how to get yourself organised, in preparation.

How to calculate five weeks’ rent

In order to calculate the correct deposit amount to ask for, the following formula can be used:

1 month’s rent x 12 / 52 = 1 week’s rent

To expand on this formula, if you multiply one month’s rent for your property by 12, then divide that total by 52, you will have the amount of one week’s rent. You can then multiply that by five, for an accurate security deposit amount.

For example, a Government summary of private rental market statistics for the period October 2017 to September 2018 states that the UK average for rent prices were at a median of £690 per month. Using this formula, you can calculate that one week’s rent would work out at £159.23, so the total you could charge for a holding deposit and security deposit would be, in this case, £796.15.

The Tenant Fees Bill has been through three readings and has now received Royal Assent to become an Act of Parliament in England. The ban is expected to save tenants at least £240m per year.

With the bill expected to result in letting agents raising their fees for landlords, to make up the difference, now is the time to consider your options, as a landlord. Will you continue to use an agent to manage your property? The results of the English Private Landlord Survey for 2018 show that already 52% of landlords are not using agents.


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