Tenants in the private rented sector in England are receiving on average £320 deposit refund because of new tenancy legislation, new figures show.
Those renting across England are reaping the benefits of the Tenant Fees Act 2019 which came into force in June. It is leading to an average deposit refund of £320.27 when agreeing a new rental contract.
Among many things, the new rules mean that security deposits are capped at a maximum of five weeks’ rent for tenancies with an annual rent of less than £50,000, or a maximum of six weeks’ rent for tenancies where the annual rent is £50,000 or more.
The law now states if a tenancy is renewed as a new fixed term agreement, the landlord or agent is obliged to return any part of the deposit which then exceeds the deposit cap.
Tenancy Deposit Scheme (TDS) is the only tenancy deposit protection scheme to have an online solution to facilitate the deposit cap refund process. The organisation used its data to work out how private renters have benefitted and has found that on average, tenants have received a refund of £320.
‘We reviewed data from when the legislation was first introduced in order to establish how frequently deposits are being partially repaid by agents or landlords,’ said Debbie Davies, assistant director of business development at TDS,
‘During this period we have made 2,550 repayments totalling £817,031.33. From delving deeper into the figures we identified the average payment was £320.27 and the highest repayment to a tenant was £3,384.62,’ she explained.
‘We believe the deposit cap is having the effect intended by Parliament, with the deposit held being reduced upon renewal, which is great news for renters,’ she added.
Meanwhile, fintech company flatfair is calling for tenant deposits to be reformed with the introduction of more dynamic solutions to the traditional system and make it less of a financial burden.
It points to research showing that almost half of tenants have had to take out a loan to cover a deposit when moving home in making its response to the Government’s tenancy deposit reform consultation
It says that the Government needs to incentivize the uptake of alternative deposit systems, and introduce an independent central clearing system for rental transactions.
It is also suggesting that a central clearing system should be used to manage all tenancy agreement transactions and calling for the introduction of an independent adjudicator who will preside over disputes between tenants and landlords.
‘The growing demand for deposit replacement services in the UK shows that a more equitable solution that affords landlords enhanced protection, while saving tenants money, is possible,’ said Franz Doerr, chief executive officer of flatfair.
‘Instead of diverting resources into solutions that perpetuate the existing tenancy deposit model, Government should promote the adoption of alternative tenancy deposit initiatives by incentivizing landlords who opt for alternative deposit solutions introducing clearing platforms for financial transactions,’ he added.
This post has originally been featured in Property Wire.