A tenancy deposit cap of one month’s rent was revealed as part of Government proposals announced in yesterday’s Queen’s Speech.
This is one of several measures designed to “make the private rental market more affordable and competitive”, the Government said. It takes forward plans announced by the Chancellor, Philip Hammond, in last year’s Autumn Statement to tackle the charges letting agents in England can levy on tenants for their services.
Landlords and letting agents will be prohibited from requiring more than four types of payment from tenants: the rent, a refundable tenancy deposit capped at one month’s rent, a refundable holding deposit capped at one week’s rent, and fees in case the tenant defaults.
Landlords have reacted with dismay to news of the tenancy deposit cap.
The National Landlords Association (NLA) estimates that around 40% of deposits are currently greater than one month’s rent.
The CEO of the NLA, Richard Lambert, responds to the plans: “The decision to cap tenancy deposits at no more than one month’s rent smacks of a political gesture from a Government desperate to court the voters who supported their opponents at the last General Election.
“We estimate that around 40% of deposits exceed one month’s rent. Whilst capping them may reduce the move-in costs for some, it will increase the temptation for others to view the deposit as the last month’s rent, leaving landlords out of pocket at the end of the tenancy if, for example, the property has been damaged.”
He adds: “Some landlords use a higher deposit to give them the extra confidence they need when letting to higher risk tenants, so this could also have the unintended consequence of deterring them from offering their property to those likely to be struggling with affordability in the first place”.
Tenant lobby group Generation Rent welcomes the Government’s commitment to a ban on letting agent fees, also announced in yesterday’s Queen’s Speech, which it says is “testament to the power of renters when we get organised. Generation Rent will be pressing to make sure the ban is implemented as quickly as possible”.
It adds that there is more work to be done on ensuring tenants’ security, as it launches a new campaign to end the eviction process by which tenants can be asked to leave with two months’ notice.
It believes this “effectively means that those living in the private rented sector never know where they’ll be living from year to year”.
Some professional landlords have already responded to the financial pressures on tenants – Get Living, which owns almost 1,500 homes in east London, ended the requirement for renters to pay a deposit last month.
The Residential Landlords Association (RLA) claims that the Queen’s Speech has left the rental market in “limbo”.
With so many changes affecting the private rental sector and landlords potentially being forced to put their rents up as a result, it’s more important than ever that you secure your rental income with Rent Guarantee Insurance.
This peace of mind cover will ensure you still get paid if your tenants default on the rent. Get an instant quote and cover online here: https://www.justlandlords.co.uk/rentguaranteeinsurance