#ExpertView: How to prepare for the Tenant Fees Ban and Deposit Cap in England
In this #ExpertView article, Debbie Davies, Assistant Director of Business Development, discusses how the Tenancy Deposit Scheme (TDS) is helping agents and landlords prepare for the incoming Tenant Fees Ban and Deposit Cap legislation in England.
On 2 April 2019, TDS became the first Tenancy Deposit Protection (TDP) scheme to introduce a range of free, online tools to help landlords and letting agents comply with the upcoming Tenant Fees Ban, including the Deposit Cap legislation, in England.
As recently announced, the Tenant Fees Ban in Wales will come into force in September 2019. TDS will soon be issuing further guidance on this for agents and landlords in Wales.
At TDS, we are committed to providing agents, landlords and tenants with guidance on any changes to legislations that may affect tenancy deposits.
Despite the Tenant Fees Act coming into force in just over 30 days, there is still confusion in the market about how exactly it will affect people.
One of the most common issues among landlords and letting agents is how the five weeks’ rent could be miscalculated, meaning some could inadvertently be caught on the wrong side of the law come June. It is not simply a case of one and a quarter months’ rent. That is why TDS has created the Deposit Cap Calculator, to take the confusion out of the process.
TDS’s suite of tools in the Resource Centre and automated deposit reduction solution are designed to make the transition to the new legislative framework as straightforward and pain-free as possible. Visit DepositCap.com to find out all you need to know about the impending changes.
We have also created a Deposit Cap bulletin, to directly inform anyone who has signed-up, of any new developments in the legislation including when TDS issues further guidance. Sign-up now to the Deposit Cap Bulletin.
Keep reading to find out more about the incoming Tenant Fees Ban and Deposit Cap.
What are the Tenant Fees Act and the Deposit Cap?
The Tenant Fees Act restricts what money agents and landlords can ask tenants to pay in addition to rent. Certain fees and charges are ‘permitted payments’. Everything else is a ‘prohibited payment’.
As part of the incoming legislation, the level of deposit landlords and letting agents in England can collect from tenants will be capped at the equivalent of five weeks’ rent for tenancies where the annual rent is up to £50,000. For those tenancies where the annual rent exceeds £50,000, the deposit will be capped at the equivalent of six weeks’ rent.
For further guidance, add link to the MHCLG guide we have published on DepositCap.com?
When does the Tenant Fees Ban and Deposit Cap apply?
The Tenant Fees Act, and Deposit Cap outlined within this legislation, comes into force on 1 June 2019. It will apply to:
- Agents and landlords in England
- New Assured Shorthold Tenancies (ASTs) and renewed tenancies (excluding statutory periodic tenancies for a period of 12 months) that arise after the legislation comes into force.
What does this mean for existing tenancy agreements?
If a tenancy agreement began before 1 June 2019, agents and landlords can continue to charge tenants fees written into that agreement (e.g. check-out or renewal fees) until 31 May 2020. From 1 June 2020 onwards, the tenancy term requiring that payment will become null and void.
Should a tenant make such a payment, it must be returned within 28 days. Failing this, agents and landlords will be treated for the purposes of the Act as having required the tenant to make a prohibited payment.
What are the penalties for taking a prohibited payment?
Trading Standards can order an agent or landlord to repay a prohibited payment to a tenant, together with interest. They can also impose a financial penalty of up to £5,000 for each breach of the legislation. Repeated breaches are a criminal offence which can lead to unlimited fines and/or banning orders.
A Section 21 notice seeking possession of a property let on an Assured Shorthold Tenancy cannot be used until any prohibited payments have been returned to the tenant.
For further guidance, contact your local Trading Standards Department.
How does the legislation affect tenancy deposits?
The legislation does not affect agents or landlords from taking tenancy deposits; they are a permitted payment. Deposits for ASTs still need to be protected in a government-approved tenancy deposit protection scheme, TDS being the only not-for-profit option.
There is no requirement to refund deposit amounts exceeding the applicable five or six eek limit where a fixed-term agreement entered into before 1 June 2019 becomes a statutory periodic tenancy.
Where a tenant renews their tenancy by signing a new fixed-term agreement on or after 1 June 2019, any amount of their existing deposit which exceeds the applicable five or six week limit for the new tenancy must be refunded.
TDS is the only tenancy deposit protection scheme to have a solution to amending the deposit amount in-line with the impending Deposit Cap. Our Deposit Cap Solution guide outlines how members of our TDS Insured and TDS Custodial schemes can easily refund excess deposits.
How is TDS helping agents and landlords prepare for the Tenant Fees Ban and Deposit Cap?
TDS has introduced a suite of online tools including a Deposit Cap Calculator to help letting agents and landlords in England ahead of the incoming legislative changes. The Deposit Cap Calculator is completely free to use and available for letting agents to embed in their own websites. Contact firstname.lastname@example.org to request the calculator for your website.
TDS has also created a dedicated Deposit Cap Resource Centre, DepositCap.com, hosting a suite of information on the incoming legislative changes including a graphical timeline, example scenarios, guides, information and other tools to help provide clarity on how the Deposit Cap will affect letting agents and landlords and how to reduce the deposit they hold whether they use TDS’s Insured or Custodial scheme. You will also be able to sign up to our Deposit Cap bulletin – through this, we can update you on any new developments within the legislation and alert you of new guidance.
DepositCap.com is a one-stop-shop for all the information landlords and letting agents need to fully prepare them for the introduction of the Act.
TDS is the first scheme to introduce tools to calculate the permitted tenancy deposit and to provide a solution to reducing the deposit in the Custodial scheme and amending the protected amount in the Insured scheme.
To see the suite of tools, visit: DepositCap.com
To sign up to the Deposit Cap bulletin, visit: Deposit Cap bulletin
To request the TDS Deposit Cap Calculator for your website contact email@example.com
About the author:
Debbie Davies joined TDS in July 2017 as the Assistant Director of Business Development. She has an extensive background in the property industry with over 18 years’ experience in residential lettings.
Debbie brings her passion for raising standards in the lettings industry into her role and is responsible for the digital marketing, advertising, communications and events management for TDS with a firm focus on business development across the TDS brand including TDS England & Wales, TDS Northern Ireland, TDS Academy and TDS Charitable Foundation.
Tenancy Deposit Scheme (TDS) is a Government-approved scheme for the protection of tenancy deposits; TDS offers both Insured and Custodial protection and also provides fair adjudication for disputes that arise over the tenancy deposits that we protect.
We provide invaluable training in tenancy deposit protection and disputes for agents and landlords through the TDS Academy as well as joining with MOL to provide the Technical Award in Residential Tenancy Deposits.
TDS Insured Scheme: where a TDS member can hold the tenancy deposits as stakeholder during the term of the tenancy.
TDS Custodial Scheme: where TDS hold the deposit for the duration of the tenancy.
TDS Academy: TDS provides property professionals with invaluable training in tenancy deposit protection and tenancy deposit disputes.
TDS Northern Ireland: TDS is Northern Ireland's leading and only not for profit tenancy deposit protection scheme.
TDS can only comment on the process for our scheme, other deposit protection schemes may have a different process/require different steps. Content is correct at the time of writing.
These views are those of the author alone and do not necessarily reflect the view of TDS, its officers and employees.
ARLA|Propertymark: For agents who would like to stay up to date, you can contact Propertymark | ARLA at: firstname.lastname@example.org. By being a member of Propertymark | ARLA you will be eligible for TDS Insured best headline rates.
RLA: If you are a landlord and would like to keep up to date with any changes that may affect you or your responsibilities, you can contact the RLA at: email@example.com and quote reference: dg715 to receive 25% off your first year's membership.