Learn About Rental Deposit in the UK

The UK rental market is very busy.  There are more properties for rent than there are to buy. Developers and landlords and renting companies have bought up properties with the intention of renting them out. The Buy-To-Let market has grown exponentially over the last few years. With so much choice, landlords can earn a good income, and tenants can fight over the best properties.  There needs to be support and regulations to control this booming market. These rules are getting implemented and applied to the sector, sometimes getting developed quickly, and implemented quicker. 

Tenants need to be protected in this growing sector. For years tenants have been a cash cow for landlords.  With monthly deposits, security deposits, holding deposits and then how many months in advance to pay the rent, it is hard and expensive for tenants. Typically, tenants must pay an advance month’s full rent plus a security deposit. When tenants lease via a rental agency, there is normally a holding deposit, sometimes an admin fee, and sometimes additional hidden fees.  

Being a tenant and finding a property can be an expensive time

Tenants of London and other major cities in the UK have been subjected to over priced agent fees for a long time, and this is true not just when they move in but also when they choose to extend current lease agreements, or move out. 

As a result, on June 1, 2019, the new Tenant Fees Act came into effect in the United Kingdom, which now affects all assured shorthold rentals, student lodging leases, and permits to rent private housing property. Holding deposit and security deposit amounts are limited under the Act, as well as what additional fees a renter may be charged.

Under the Tenant Fees Act, there are some fees and levies that are allowed, whereas others are called “prohibited payments.”

Which fees have been prohibited?

To begin with, your landlord is responsible for paying all up-front letting agency fees. This covers all administrative, reference, credit check, and guarantor expenses. Tenants cannot be charged for these things.

Also, deposits in excess of five weeks’ rent. There is a maximum amount of money you may be charged, and it’s six weeks’ rent if you’re renting a house that costs more than £50,000 a year. 

Lastly, reserving a property with a deposit of more than one week’s rent is not allowed by law.

How do you calculate five weeks’ rent for rental deposits?

The equation may be used to determine the appropriate deposit amount to give:

1 month’s lease x 12 / 52 = 1 week’s rental fee

Or you can also use the tenancy deposit calculator by Open Rent Landlord Hub to automatically check it.