#AskTDS: How Will the Tenant Fees End of Transition Affect Tenancy Deposits in 2020?

AskTDS_22.05.2020

On the 31st May 2020, the transition period for the Tenant Fees Act in England will end. What does this mean for tenancy deposit protection?

To recap, the Tenant Fees Act came into effect in England on 1st June 2019 and banned landlords and letting agents from charging fees to tenants in private rented properties. From that point on, tenants could not be charged for admin fees, referencing, credit checks, inventories or guarantor assessments among other things. The only charges that were allowed to continue were rent, tenancy deposit protection and default charges.

As part of that law, the deposit cap was introduced which limited landlords and letting agents, renting a property in England, on how much deposit they could request from a tenant at the start of a new tenancy. As a result, deposits are now capped at 5 weeks’ rent (if the annual rent is £50,000 or below) and 6 weeks’ rent if the annual rent exceeded £50,000.

The transitional period is ending – what will change?

The transitional period is due to end on May 31st, 2020. This means that from June 1st 2020, the Tenant Fees Act will be applicable for all private tenancies in England, including the ones that began before June 2019 when the legislation came into effect.

What about the deposit cap?

The good news is that the end of transition won’t affect the deposit cap, as it isn’t included in the transition period.

When the law was introduced, it stated that any existing deposit above the 5-week cap should be refunded on any new or renewed fixed-term tenancy agreements created on or after June 1st 2019. This remains the case. You will not need to reduce the deposit below the cap unless you begin a new fixed-term tenancy agreement with your private, residential tenant.

The deposit cap isn’t affected if you temporarily reduced your tenant’s rent during Covid-19 either, unless you entered into a new tenancy agreement. The deposit cap applies to the value of rent at the start or renewal of tenancy. If you decide to permanently reduce the rent, you will have to start a new tenancy agreement with a new deposit amount to reflect that new rent value.

Tenant fees in England and Wales

It’s important to note that the tenant fees legislation is not the same in England and Wales. Firstly, there is currently no deposit cap in Wales. Secondly, there are differences in the fees that can and can’t be charged in both countries. The TDS Fees Matrix shows how each region differs in a simple-to-read table here: TDS Fees Matrix 

Tenant Fees Guide and Deposit Calculator

Tenancy Deposit Scheme (TDS) have produced an extensive online resource within their new information lounge to help people learn more about tenant fees and the deposit cap.  The online guide shows letting agents and landlords what they will need to do after the transition period ends, along with an instant Deposit Cap Calculator for further clarity on fees.

If you would like to be kept up to date with the latest legislation surrounding tenancy deposit protection, become a member of TDS for free by joining the no-fee Custodial scheme today.


About TDS

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. Join TDS Insured today.

TDS Custodial Scheme: where TDS hold the deposit for the duration of the tenancy. Join TDS Custodial for FREE today

TDS Academy: TDS provides property professionals with invaluable training in tenancy deposit protection and tenancy deposit disputes. Click here to see upcoming TDS Academy’s.

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 ARLA Propertymark here. By being a member of ARLA Propertymark you will be eligible for TDS Insured best headline rates.

NRLA: 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 receive 25% off your first year’s membership when joining here.