How much deposit should you pay your landlord?

Rental sector tenants’ security deposits should be capped at five weeks’ worth of rent. This is because larger sums than this can cause financial difficulties for renters, a committee of MPs has urged.

The Housing, Communities and Local Government Committee made the comments in a report. The draft Bill aims to make renting in the private rented sector fairer. It should also be easier for tenants. It will introduce a ban on fees imposed on tenants by landlords and letting agents.

The committee said that with increasing numbers of people living in the private rented sector, it supports the aims of the draft Bill. It also broadly supports the proposed legislation.

The committee was asked to undertake scrutiny of the draft Bill ahead of its proposed passage through Parliament. The draft Bill proposed prohibiting payments with the exception of rent. It also looked at security deposits of up to six weeks’ rent. In addition, holding deposits of up to one week’s rent, and default fees.

But the committee’s report recommends the maximum amount that can be charged as a security deposit should be lowered.

It said security deposits should be capped at the equivalent of five weeks’ rent. This is because finding six weeks’ worth of rent can cause financial difficulties for tenants.

By reducing the cap on security deposits, the private rented sector would become more affordable. It would also protect landlords from rogue tenants.

The committee also said landlords should not be able to retain the full holding deposit. This is if a tenant fails a reference check despite providing accurate information. Landlords should only be allowed to retain the full holding deposit if the tenant knowingly provides false or misleading information, the committee said.

It also said additional funding should be made available to local authorities to enforce the legislation.

Clive Betts, who chairs the Housing, Communities and Local Government Committee, said: “With more and more people living in the private rented sector, this legislation has the potential to make a difference to millions of people by cracking down on unfair fees and saving tenants hundreds of pounds.

“We believe, however, that there are clear improvements that could be made to the Bill that would ensure it has a much better chance of delivering on its aim of making renting fairer and easier.

“Moving home is already an expensive time. Many people struggle to find large sums of money at the start of their tenancies to put down as a deposit.

“Lowering the cap from six weeks’ worth of rent to five will help make the private rented sector much more affordable. It will keep protection for landlords from rogue tenants.”

The Government estimates that the average household in the private rented sector will benefit by between £18 and £50 a year. The committee said it had heard that tenants could benefit by much more.