A leading trade body says a cap on damage deposits paid by tenants – as proposed by the government – could lead to an increase in formal deposit disputes.

The cap was contained in the provisions of the Tenants’ Fee Bill, unveiled on the same day as the Queen’s Speech back in June. It made general reference to a cap on both holding and security deposits, as well as the high-profile pledge to ban letting agents’ and landlords’ fees levied directly on tenants.

It has been proposed that holding deposits are capped at no more than one week’s rent and security deposits at no more than one month’s rent – down from the current level of two months.

Now the Association of Independent Inventory Clerks, which has almost 1,000 members nationwide, says that while a cap on deposits will help tenants when they first rent, the lower sums required could lead to an increase in the number of formal deposit disputes. 

These disputes occur when tenants and landlords cannot agree over proposed deductions taken from the damage deposit at the end of a tenancy.

“A cap on security and holding deposits is certainly more positive than an outright ban as has been proposed for up-front letting agent fees charged to tenants” says Danny Zane, joint chair of the AIIC.

“However, we are concerned that as tenants will be committing less money to cover damages at the start of a tenancy, they may take a more laissez faire approach to the rental property, and landlords could therefore be left with more damage and repairs to deal with.”

Zane warns that in such cases, landlords are more likely to make deductions from tenants’ deposits which – if challenged by the renters – could lead to a formal deposit dispute.

“We hope the lower sums involved don’t encourage renters to take less care of their rental properties. This government initiative could, in some cases, have unintended consequences” adds Emma Glencross, the association’s other joint chair. 

Regardless of the proposed cap, the AIIC stresses that an independently compiled inventory is an integral part of the rental process which can significantly reduce the chances of a deposit dispute between tenants and landlords.

“An impartial, professional inventory comprehensively details the condition and contents of the property at the start and end of the tenancy,” explains Zane, who is also managing director of My Property Inventories.

“They help to protect tenants from unfair charges and can also stop landlords being left out of pocket.”

He says that in the event there is a formal deposit dispute, it’s widely considered that the three deposit protection schemes will look more favourably on check-in and check-out reports that have been produced both professionally and independently.

A full draft of the Tenants’ Fees Bill is expected to be published later this year with legislation being introduced at some point in 2018.