Can deposit exceed two months' rent?

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    Can deposit exceed two months' rent?

    Originally posted by yaf201 View Post
    I should look it up, but there's a potential problem witha taking more than 2 month's rent as a deposit.
    No, there isn't. Here's why (copied from another thread):

    Originally posted by Paul_f View Post
    Yes! You cannot ask for more than the equivalent of 2 months rent otherwise you could be creating a premium lease which would give the tenant potential rights of a continued occupation. Housing Act 1988 S.15 (4)(c)
    Originally posted by jeffrey View Post
    1. That's not quite what s.15(4)(c) says.

    2. Yes, it does define as "premium" a deposit exceeding one-sixth of annual rent.

    3. However, that definition applies only for s.15(3)(b).

    4. So:
    a. s.15(1) states that, subject to s.15(3), every periodic AST/SAT (whether a statutory continuation or explicitly created as such from day1) impliedly prohibits assignment and subletting, and [by s.15(2)] s.19 of LTA 1927 then does not apply; and
    b. if the AST/SAT is created as explicit periodic from day1, there is [by s.15(3)] no such implied prohibition if:
    i. the Agreement contains an explicit prohibition to like effect; or
    ii. the Agreement reserves a premium, whether a real one or merely a larger deposit deemed a premium by s.15(3)(c).

    5. Result: yes, L can reserve a deposit exceeding two months' rent.
    JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
    1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
    2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
    3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
    4. *- Contact info: click on my name (blue-highlight link).

    #2
    Originally posted by jeffrey View Post
    No, there isn't.
    I said I should have looked it up http://www.landlordzone.co.uk/deposits.htm. I can't say if the following is correct or not, i just knew I'd seen it somewhere.

    The Amount of the Deposit

    The amount of the deposit should be a maximum of two months' rent. If the deposit is more than this amount it could in theory count as a premium and may give the tenant an automatic right to assign the lease without the landlord's consent.

    This eventuality of assignment should be precluded by the terms of the tenancy agreement anyway, but as a precaution the deposit should be kept below two months' rent.

    One month's rent is a common figure, though some landlords avoid this as it could encourage the tenant to substitute the deposit for the last month's rent - 5 or 6 weeks may be acceptable.

    Comment


      #3
      Originally posted by yaf201 View Post
      The amount of the deposit should be a maximum of two months' rent. If the deposit is more than this amount it could in theory count as a premium and may give the tenant an automatic right to assign the lease without the landlord's consent.
      As I explained, this is just wrong.
      JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
      1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
      2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
      3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
      4. *- Contact info: click on my name (blue-highlight link).

      Comment


        #4
        Larger Deposits

        Its been suggested to me that if a landlord takes a deposit that is larger than 2 months rent then the tenant can acquire additional rights.

        Does anyone know if this is correct ? and
        What rights does the tenant get ?

        Thanks

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          #5
          What is the rent?



          Freedom at the point of zero............

          Comment


            #6
            So far as I can recall it used to be the case in respect of pre-HA 1988 tenancies that a deposit was not allowed to be for more than two months' rent. Perhaps the suggestion comes from that.

            Comment


              #7
              My notes suggest check Housing Act, 1988, S15 - if more than 2 months Tenant has right to assign the lease (eg to a family of 7 with 3 incontinent rotties none of whom you've ever met...an extreme example I think, there is probably some other prohibition against that particular but you get my drift??)..

              see...
              http://www.legislation.gov.uk/ukpga/1988/50/section/15
              I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

              Comment


                #8
                Thanks for the information everyone.

                There certainly seems to be some confusion of what the 1988 Housing Act is saying.

                Based on what Jeffrey has posted I'm going with X3 months deposit.

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