{"id":1035,"date":"2019-10-21T12:21:32","date_gmt":"2019-10-21T12:21:32","guid":{"rendered":"https:\/\/www.rentila.co.uk\/blog\/?p=1035"},"modified":"2025-11-10T09:03:50","modified_gmt":"2025-11-10T09:03:50","slug":"tenancy-security-deposit","status":"publish","type":"post","link":"https:\/\/www.rentila.co.uk\/blog\/tenancy-security-deposit\/","title":{"rendered":"Tenancy Security Deposit: A 5-minute guide for landlords"},"content":{"rendered":"
\"Tenancy<\/div>\n

You\u2019ve made the ideal investment and have furnished your rental property. You\u2019ve checked the references of your soon-to-be tenant. But you also want to take a security deposit to protect yourself from any damages down the line. Here\u2019s the lowdown on what you need to know.<\/p>\n

<\/p>\n

What is a tenancy security deposit, and how much can I ask?<\/h2>\n

A tenancy security deposit is an amount you can ask your tenant to pay. This can cover you in the event there are damages to the property or the contents at the end of the tenancy. <\/p>\n

The Tenant Fee Ban of 2019 means that there are new caps to how much a landlord may charge as a deposit. In Scotland, landlords may charge up to two months of the rental amount as a deposit. However, in England and Wales, this is limited to five weeks if the annual rental income is below \u00a350,000<\/strong> and six weeks for annual rental above this amount.<\/p>\n

When is it paid?<\/h2>\n

The deposit is due when your tenant signs the contract and takes receipt of the keys.<\/p>\n

Do I have to charge a deposit?<\/h2>\n

In short, no. However, it\u2019s extremely advisable you do. If you are charging a deposit, you MUST enter the deposit protection scheme. You should be aware you can only ask for five weeks\u2019 rent as a deposit so you won\u2019t be protected for costs incurred above and beyond this amount.<\/p>\n

\n

Good to know<\/h3>\n

You can take out an insurance policy that can help you recoup some costs which may be incurred when you rent your property. Such unfortunate circumstances include unpaid rent, extensive damage, and court costs required to gain either a possession order or eviction notice.\n<\/p><\/div>\n

How to calculate a deposit<\/h2>\n

It might seem easy enough to calculate five weeks’ rent but be careful to calculate it correctly and round it down to ensure you stay within the legal amount allowed.<\/p>\n

To accurately calculate five weeks’ rent, you’ll need to take the monthly rent and multiply it by 12 to ascertain the annual rent. Divide the annual rent by 52 to get the weekly rent, and then multiply this by five if you are charging a 5-week deposit. This is essential as the monthly rent is not exactly four weeks.<\/p>\n

Let’s take a look at the right and wrong ways to calculate the legal deposit for a property with a monthly rent of \u00a31000 as an example:<\/p>\n

The correct way to calculate a legal five-week deposit :<\/b><\/p>\n

Rent of \u00a31000 per month<\/p>\n

Annual rent= \u00a31000 x 12 months= \u00a312,000<\/p>\n

Weekly rent= \u00a312,000\/52weeks=\u00a3230.76<\/p>\n

Five-week deposit= \u00a3230.77 (weekly rent) x5= \u00a31153.84<\/p>\n

Note: Charging a penny more than \u00a31153.84 on a property with a rental income of \u00a31000 is ILLEGAL<\/b><\/p>\n

DO NOT<\/strong> calculate the five-week deposit as follows :<\/p>\n

Rent of \u00a31000 per month<\/p>\n

Incorrectly assume monthly rent is four weeks and calculate weekly rent as :<\/i><\/p>\n

Weekly rent= \u00a31000\/4=\u00a3250<\/p>\n

Five week deposit=\u00a3250(weekly rent) x5=\u00a31250<\/p>\n

\u00a31250 is incorrect, and you are committing an offense if you charge this.<\/b><\/p>\n

What is the deposit protection scheme?<\/h2>\n

The tenancy deposit protection scheme came into place on the 6th of April 2007. Until then, while landlords had peace of mind from taking a deposit, tenants had none about the safe return of their deposit. As such, government-backed deposit schemes came about to help protect tenants from unscrupulous landlords. The schemes are companies which safeguard a tenant\u2019s deposit<\/p>\n

The schemes also benefit fair landlords by providing free independent adjudication in the event of a dispute.<\/p>\n

They also prevent the smaller claims courts from being clogged up by tenancy litigation cases.<\/p>\n

What do I need to know about deposit protection law?<\/h2>\n

It\u2019s important not to fall foul of the deposit protection law as you can be penalised. As a landlord, it\u2019s up to you which one of the three govern-backed schemes you choose. It\u2019s your responsibility to inform your tenant within 30 days within which scheme their deposit is being held.<\/p>\n

What are the penalties for not abiding by the deposit protection law?<\/h2>\n

If you don\u2019t inform your tenant and they make a complaint, you could be fined. You may be forced to pay back the deposit. The court may also grant your tenant compensation, which can be up to three times the value of the deposit.<\/p>\n

If you haven\u2019t acted fairly to a tenant by protecting their deposit, then don\u2019t expect your tenant to behave justly to you by paying your rent. You\u2019ll also find that courts look dimly on landlords breaking deposit protection law. As a consequence, you may find that a judge has little sympathy for you at a later date.<\/p>\n

If you seek damages for rent arrears, fewer judges will grant in your favour. You may also struggle to win a possession order when attempting to evict a tenant if you failed to protect a deposit.<\/p>\n

What schemes can I use?<\/h2>\n

In England and Wales deposits can be registered with:<\/p>\n