Tenancy Deposits
What is a Tenancy Deposit?
A Tenancy Deposit is a sum of money paid by the tenant at the start of the tenancy. It acts as security for landlords in case the tenant breaches their obligations under the terms of the tenancy agreement. Most landlords will chose to take a Deposit as it provides financial protection and encourages tenants to look after the property.
Tenancy Deposit Rules in England
Requesting a Tenancy Deposit is not a legal requirement, however, If a landlord takes a Tenancy Deposit, they must comply with the Housing Act 2004 by:
- Protecting the deposit in a government-approved Tenancy Deposit Protection (TDP) scheme within 30 days of receiving the deposit; and
- Providing the tenants with “Prescribed Information”, explaining how their deposit is protected and the circumstances under which deductions may be made.
Failure to comply with deposit protection rules can result in serious consequences and a landlord may be ordered to repay they deposit to the tenant in full and pay a financial penalty of up to three times the deposit amount. There may also be implication is regaining possession of the property. Landlords should refer to the Tenancy Deposit Protection Guidance for Landlords.
Deposit Caps and the Tenant Fees Act 2019
Landlords must comply with the Tenant Fees Act 2019, which has strict limits on deposit amounts, and bans certain fees. Under the legislation:
- Holding Deposits are capped to one week’s rent; and
- Security Deposits are capped to five weeks’ rent if the yearly rent is £50,000; or six weeks rent if the yearly rent is £50,000 or more
If a landlord or letting agent breaches the deposit cap rules, they will face financial penalties and enforcement action by local authorities. Landlords should refer to the Guidance Note: Tenant Fees Act 2019 (England) and Tenant Fees Act 2019 (England) Matrix.
For landlords in Wales, there are different rules under the Renting Homes (Wales) Act 2016. Landlords should refer to Renting Homes Wales for specific requirements.
Explore the full range of tenancy deposit guidance, documents and templates in the list below:
- Guidance Notes: Tenancy Deposit Protection & Compliance for Landlords in England
- Tenancy Deposit Compliance Checklist for Residential Landlords (England)
- Landlord’s Holding Deposit Agreement (England)
- Receipt for Tenancy Deposit
- Prescribed Information about Deposit Protection
- Form N215 Certificate of Service of Prescribed Information
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Frequently Asked Questions
No. Taking a tenancy deposit is optional, although many landlords choose to so as security, especially with the introduction of longer tenancies. Under the Tenant Fees Act 2019, the maximum deposit is five weeks' rent where the annual rent is below £50,000, or six weeks' rent where the annual rent is £50,000 or above. If a tenancy deposit is taken, it must comply with the applicable deposit protection requirements.
Where section 213 of the Housing Act 2004 applies, the landlord must comply with the authorised scheme's initial requirements within 30 days beginning with receipt of the deposit. Within the same period, the landlord must give the tenant and every relevant person the complete prescribed information in the required form or a form substantially to the same effect. A relevant person is someone who paid the deposit on the tenant's behalf.
If a tenancy deposit is not protected correctly or the required Prescribed Information is not provided, the tenant may be able to claim compensation of between one and three times the deposit amount, and the deposit itself may need be repaid. Deposit protection failure can also restrict a landlord's ability to recover possession until the deposit requirements have been properly remedied. Landlords should resolve any deposit compliance issues before serving a possession notice.
A holding deposit reserves the property while pre-tenancy checks and arrangements are completed. In England it must not exceed one week's rent, and only one holding deposit may be held for the same housing at a time. The default deadline for agreement is the 15th day of the period beginning with receipt, unless a different deadline is agreed in writing. Unless a statutory exception applies, repay the deposit to the person who paid it within seven days beginning with the relevant statutory event. If the tenancy is entered into, that payer may consent to the money being used towards the first rent payment or the tenancy deposit. Retention is permitted only where Schedule 2 to the Tenant Fees Act 2019 allows it, and written reasons must be given to the payer within the statutory time.
No. Under the Tenant Fees Act 2019, the tenancy deposit cap applies regardless of whether the tenant has a pet. Landlords cannot take an additional pet deposit or increase the deposit above the permitted limit. Landlords can, however, include appropriate pet consent terms and requirements within the tenancy documentation, including provisions relating to tenant responsibilities and any damage caused beyond fair wear and tear. Templates are available to assist with pet consent and pet-related tenancy requirements.