MPs Suggest Cap on Deposits to Protect Tenants

MPs and landlords have been at loggerheads over how much tenants should pay for deposits in England.

The Housing, Communities and Local Government Committee (HCLG) has concluded in a report that deposits should be limited to the equivalent of 5 weeks rent, one week less than the current proposal of 6 weeks. The report suggested other measures aimed at protecting tenants, including:

• Landlords should not be allowed to withhold the entirety of a deposit if an occupier fails a reference check
• Default fees are easily abused so there needs to regulations when it comes to calculating the amount and type of default fees
• More funding was needed to be made to local councils to help enforce new rules

“With more and more people living in the private rented sector, this legislation has the potential to make a difference to millions of people by cracking down on unfair fees and saving tenants hundreds of pounds” said Clive Betts MP, chair of the committee.

“We believe however that there are clear improvements that could be made to the Bill that would ensure it has a much better chance of delivering on its aim of making renting fairer and easier” he added.

Various landlord groups have said that the 6-week limit is a viable option with anything lower posing a risk both to landlords as well as damaging the prospects of certain tenants. The National Landlords Association (NLA) warned that a lower deposit limit could work against renters with pets “by removing [landlords’] flexibility to take a higher deposit to cover for pet damage”.

Richard Lambert, chief executive of the NLA said: “There is no doubt that some agents have got away with excessive fees and double-charging landlords and tenants for far too long, but agents play a key role in managing properties and the ban will eventually boomerang back on tenants.”

The Residential Landlords Association (RLA) referred back to figures that showed that 40% of landlords have had tenants that leave without paying the last months rent. According to the RLA having a lower cap would work in the favour of the few tenants who try to take advantage of landlords as the deposit will not cover the last months rent as well as any damage to the house.

“Policy makers need to address the problem of tenants who fail to pay their rent with as much energy as tackling rogue landlords. Proposals to lower the cap on deposits paid by tenants will play into the hands of the minority of tenants who cheat those providing housing for them out of the rent they are legitimately owed” says Alan Ward, chair of the RLA

The Select Committee has argued that the 6-week limit could put financial stress on tenants and that a limit of 5 weeks would strike a middle ground between affordability for those renting and protection for landlords against runaway tenants.

Clive Betts MP, chair of the HCLG Committee, added: “We also had concerns about how the law will be enforced. Funding enforcement through the retention of fines gives local authorities a perverse disincentive to proactively engage with lettings agents and landlords.

“If councils are to be given this extra enforcement responsibility, they must either be given extra resources or the maximum amount of civil penalty needs to be increased.”

Homelessness charity Shelter said that the new proposals would still allow for renters to fall victim to high default fees, which, according to Shelter, had reached an average of £272. Although there are certain regulations on agent fees, the charity has warned that there are still ‘backdoor’ methods by which renters can be charged unfairly for small infractions.

“This ban was wildly popular with renters, which is why it's so important that it does exactly what it says on the tin by completely scrapping rip-off letting agent fees,” said Greg Beales, director of policy and campaigns at Shelter.

“It is good to see the ban moving forward, but these proposals would leave the back door open for agents to continue charging tenants in different ways and let down the renters it was supposed to help.”