Property News

AIIC suggests deposit cap could lead to more disputes

Em Morley - August 23, 2017

The Government’s plan to introduce a cap on deposits paid by for UK tenants in the private rental sector could actually lead to an increase in formal deposit disputes, according to a new claim.

Earlier this Summer, as part of the Queen’s Speech, the Government unveiled the draft Tenants’ Fees Bill, which included details of the upcoming ban on letting agent fees charged to tenants. In addition, the ‘Speech gave the first mention of a cap on holding and security deposits.

Deposits

It has been mooted that holding deposits are capped at no more than a week’s rent and security deposits at no more than one month’s rent. This is down from the current level of two months.

The National Landlords Association predicts that almost 40% of present security deposits exceed the proposed one month rent cap. An entire draft of the Tenants’ Fees Bill is expected to be published later in 2017, with full legislation set to be introduced in 2018.

However, the Association of Independent Inventory Clerks (AIIC) believe that while a cap on deposits will help tenants initially, the lower sums required could lead to a rise in the number of formal deposit disputes.

Disputes

Danny Zane joint chair of the AIIC, noted: ‘A cap on security and holding deposits is certainly more positive than an outright ban as has been proposed for up front letting agent fees charged to tenants. However, we are concerned that as tenants will be committing less money to cover damages at the start of a tenancy, they may take a more laissez faire approach to the rental property, and landlords could therefore be left with more damage and repairs to deal with.’

AIIC suggests deposit cap could lead to more disputes

AIIC suggests deposit cap could lead to more disputes

Should this scenario arise, landlords are more likely to make deductions from a tenancy deposit. Of course, this could lead to more formal deposit disputes.

Emma Glencross, joint chair of the AIIC, went on to say: ‘We understand that some tenants are finding damage and holding deposits unaffordable, and a cap on deposits will certainly help them when looking for a rental property. We hope that the lower sums of money involved don’t encourage renters to take less care of their rental properties. Both landlords and tenants want to avoid deposit disputes at all costs and this Government initiative could, in some cases, have unintended consequences.’

Importance of Inventory

Regardless of the proposed cap on fees, the AIIC has moved to once again stress the importance of a professionally compiled inventory. A photographic inventory can certainly reduce the chance of deposit disputes.

Mr Zane added: ‘An impartial, professional inventory comprehensively details the condition and contents of the property at the start and end of the tenancy. They help to protect tenants from unfair charges and can also stop landlords being left out of pocket.’[1]

[1] http://www.propertywire.com/news/uk/planned-uk-deposit-cap-lead-disputes-says-industry-trade-body/