How to calculate five weeks’ rent for tenancy deposits in England
On 1st June 2019, a new tenancy deposit cap was introduced as part of the Tenant Fees Act 2019 in England.
Landlords can now only require a maximum security deposit of five weeks’ rent and a holding deposit of one week’s rent.
Measures have been put in place to regulate the fees charged to tenants by landlords and letting agents. This also includes the abolishment of most upfront fees.
How to calculate five weeks’ rent for tenancy deposits
In order to calculate the correct deposit amount to ask for, the following formula can be used:
1 month’s rent x 12 / 52 = 1 week’s rent
1 week’s rent x 5 = The tenancy deposit
To expand on this formula, if you multiply one month’s rent for your property by 12, then divide that total by 52, you will have the amount of one week’s rent. You can then multiply that by 5 for the security deposit amount.
For example, a government summary of private rental market statistics for October 2020 to September 2021 states that the median monthly rent in England was £755. Using this formula, you can calculate that one week’s rent would work out at £174.23, so the total you could charge for a holding deposit and security deposit would be, in this case, £871.15.
Make sure your tenant’s deposit is protected
Landlords must also place deposits for shorthold tenancies in a government-approved scheme. In England, the options are:
Concerned about tenant rent arrears?
Although you may have agreed a tenancy and secured the deposit, there’s no knowing what financial difficulties your tenants may face in the future. If you are worried about your tenants defaulting on the rent, you can consider taking out rent guarantee insurance. This can help you financially when your tenants can’t or won’t pay the rent. It can also help with legal fees related to evicting tenants, breaches to the tenancy agreement, and legal defence.
Learn more on our Rent Guarantee Insurance page.
Is your property protected?
You should also ensure your rental property has suitable landlord insurance, to help protect it from accidental and malicious damage. Having cover in place that can help with a range of scenarios and offers peace of mind. Visit our Landlord Insurance page for more information and to get a quote.
The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited trading as Just Landlords accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein. FP1663-2022
