However, the same date also sees changes made to deposits, and it is vital that landlords prepare for deposit changes.
Holding deposits have been a feature of the letting industry for some time. There were concerns that some landlords and agents were charging high fees for holding deposits, and not all landlords were consistent in the return of these deposits.
Therefore, changes have been made to formalise holding deposits, and landlords should familiarise themselves with the new practice.
Holding deposits will now be capped at a maximum of one week’s rent. Landlords don’t have to charge the equivalent of one week’s rent to hold a deposit, but they will no longer be allowed to charge more than this sum.
There have also been changes to how a landlord should respond to a tenancy not going ahead. The landlord now has 15 days from accepting the holding deposit to decide whether the lease will take place or not. If the landlord decides against allowing the tenancy to happen, the deposit must be repaid, in full, within seven days of the landlord deciding against the lease or the deadline passing.
If the tenant backs out of the agreement if the tenant fails rent checks or the tenant has provided incorrect information, the landlord doesn’t have to return the full holding deposit.
When the tenancy agreement goes ahead, the landlord should return the holding deposit within seven days of the transaction. However, the landlord can use this deposit as part-payment of the security deposit, or used towards the initial rent payment.
There are also changes to the size of security deposit a landlord can ask for from a tenant. The new cap will be five weeks’ rent for properties where the annual rent is less than £50,000. For rental accommodation where the annual rent is £50,000 or higher, the cap for security deposits will be six weeks’ rent.
Given that landlords should place this deposit into a Government-backed scheme, it isn’t as if this is money the landlord holds, but the new caps may require landlords to change their working practices.
There has been a lot of debate about deposit levels, with varying opinions from landlord and tenant groups. Much of the Government focus has been on making rental accommodation for more affordable and practical for tenants. Tenant groups have approved the changes, but there has been some disquiet from landlord groups regarding the limitation of fees and stricter caps.
If you are a landlord looking for assistance in running your operations, please contact Holmes Estate Agents, and we will do everything we can to help you.