Landlord Legislative Update May 2019 Residential Landlord Update for joomag | Page 10

T E N A NT FEES
AC T
CO N TI NUED
that the tenant’s income declaration was significantly too high, or
the tenant provided information which is clearly inaccurate about
their income or employment, or the tenant failed to disclose
(when directly asked) any relevant information which later comes
to the agent’s attention, such as valid County Court Judgements.
TENANCY DEPOSITS
The legislation does not prevent a landlord (or a letting agent
acting on the landlord’s behalf ) from taking tenancy deposits.
Under the Tenant Fees Act for all new tenancies signed on or after
1 June 2019 Tenancy Deposits are capped at no more than five
weeks’ rent where the annual rent is less than £50,000, or six weeks’
rent where the annual rent exceeds £50,000. A Tenancy Deposit is
money held by the landlord/agent as security during the period
of the tenancy and reserved for any damages or defaults on the
part of the tenant.
Under the Housing Act 2004 if a property is let on an Assured
Shorthold Tenancy which started on or after 6 April 2007 the
landlord must put the tenant’s deposit in one of the three
government-authorised Tenancy Deposit Protection (TDP)
schemes, at GSC Grays we are members of the Deposit Protection
Service (DPS). A tenant’s deposit must be put into the scheme
within 30 days of receiving it at the commencement of the
tenancy and must be returned within 10 days of agreeing with the
tenant how much they will get back at the end of the tenancy. If
a tenant has a dispute with their landlord, then the DPS scheme
will adjudicate the dispute and allocate the amount of the deposit
to be returned to the landlord and tenant based on their findings.
There is no requirement to refund deposit amounts exceeding the
applicable five- or six-week 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 must be refunded.
DAMAGES
The Tenant Fees Act will not affect a landlord’s entitlement to
recover damages for breach of the tenancy agreement. Damages
can still be claimed by way of a deduction from the Tenancy
Deposit. The Deposit Protection Service (DPS) will continue to
consider claims for deposit deductions based on the loss suffered
by the landlord or an agent (working on the landlord’s behalf )
as a result of the tenant’s failure to comply with the tenancy
agreement. The DPS will check that the tenant had an obligation,
that the tenant failed to meet the obligation, and that the landlord
or agent suffered a loss as a result. The amount claimed must
be reasonable, and the landlord or agent must do what they
reasonably can to keep that loss to a minimum.
DEPOSIT REPLACEMENT SCHEMES
A number of companies have emerged that offer landlords and
tenants an alternative to the traditional ‘cash’ tenancy security
deposit. These services are often referred to as ‘deposit-free’ or
‘deposit replacement’ schemes and have gained traction, particularly
in the last year as a number of new suppliers have emerged. When
using these products, instead of paying a cash deposit, tenants pay
a non-refundable fee to purchase a product or join a service that
offers the landlord protection against financial loss.
There are several different models of deposit-free schemes, but the
majority share a similar approach and claim comparable benefits.
This includes tenants not having to pay a five-week deposit when
moving into a privately-rented home. Broadly speaking, deposit-free
services fall into two categories; those which are selling insurance
policies to tenants (where the providers are FCA regulated but not
all the products themselves fall under FCA regulation), and those
which are themselves insurance-backed (where the scheme insurer
is FCA regulated).
GSC Grays are currently investigating the companies on offer and
which offer the best products for our landlords and this information
will be provided in due course.
PETS
Under the Tenant Fees Act, landlords and letting agents will no
longer be able to take a higher security deposit for tenants with
pets; the maximum five or six weeks rent for Tenancy Deposits
cannot be exceeded. However, the Tenant Fees Act does not
prevent landlords and agents from claiming damages for breach of
tenancy agreement, so damage done by pets can still be claimed
for. It’s just that the amount of funds held on deposit to cover those
damages is restricted to a maximum of five- or six-weeks’ rent. If the
deposit isn’t enough to cover the damage, landlords will have to
consider legal proceedings.
Where a prospective tenant already has a pet before they enter the
tenancy agreement, letting agents and landlords should set the
rent for the tenancy at a level for the wear and tear that the pet
will cause. Agents will be able to charge a higher monthly rent for
tenants with pets, so long as they make the prospective tenants
aware of the additional cost at the earliest available opportunity.
Agents can advertise a property with two different rents, one for
tenants with a pet and a lower one for tenants without a pet. The
lower rent reflects a relatively low level of fair wear and tear and the
other at a rent that anticipates a higher level of wear and tear.
Agents and landlords should be specific about what pet(s) are
allowed. All pets are not alike, and neither are the owners. If agents
and landlords want to be precise, attach a picture of the animal to
the tenancy agreement or variation agreement.
LANDLORD LEGISLATIVE UPDATE 2019 • 8