Tenancy deposits – they've become a normal step in renting a property, and it's easy to forget that they've not always been around.
Mandatory deposit protection, which requires landlords or their agents to place every tenant's deposit with one of the Government-backed schemes, has been in force since 2007.
The three main schemes – mydeposits, The Deposit Protection Service and The Tenancy Deposit Scheme – recently announced some changes, all coming into action this month, which you can read about in more detail here.
But how much does the average landlord charge for a tenancy deposit these days and does the figure vary across the country? We've taken a closer look...
Two sets of research carried out recently have tried to find out the current cost of the average tenancy deposit and how it might change in the coming years.
A study undertaken by the Centre for Economics and Business Research (Cebr), on behalf of money.co.uk, concluded that the average landlord charges four weeks' rent for a security deposit.
Cebr calculates this is around £800. If you take the latest monthly national average rent from the HomeLet Rental Index, it's a similar figure at £744 (excluding London).
By 2026, Cebr says that the average tenancy deposit will hit £1,111 across the country, and a whopping £2,753 in London.
It also predicts that the cost of average deposits will rise sharply across the whole of the South of England.
It estimates that the average deposit in the South East will hit £1,469 by 2026, while in the South West it expects the average deposit to represent 80% of median monthly earnings – up from 66% last year.
The other piece of research, carried out by conveyancing firm Slater and Gordon, places the current average tenancy deposit at £549.
The average of Cebr's estimate of four weeks' rent, our national average rent and Slater and Gordon's average deposit is £698.
Interestingly, a fifth of landlords taking part in Slater and Gordon's study said they wished they had asked for higher deposits after damage to their property's carpets, walls, appliances and more wasn’t covered by the original payment.
Disputes and deductions
Slater and Gordon's research also focused on why deposits are withheld by letting agents and landlords.
It found that the most common reason for a deposit being held back or a deduction is stained carpets.
This is followed by chipped paint and damaged wallpaper, broken or damaged furniture and broken or damaged windows.
Taking another look at our Tenant Survey 2015, our tenants painted a similar picture. Of the 15,000 people we spoke to, 13% had had their deposit held back.
We found that the most common reason for this was cleaning issues. Other recurring problems highlighted in our survey were damage to fixtures and fittings, the state of the garden, rent arrears and furniture damage.
How can agents reduce the chance of a dispute?
As you can see from the figures above, in most cases a deposit represents a large sum of money for the tenant. It's therefore reasonable to suggest that they'll be keen to see this sum returned in full at the end of the tenancy.
For landlords and letting agents, too, a hassle-free return of the deposit is often preferable as it means avoiding the lengthy and potentially stressful occurrence of a deposit dispute.
For tenants, the steps they can take to reduce their chances of a deposit deduction and potential dispute are fairly straight-forward.
Taking into account the research above, it's quite clear that the vast majority of problems stem from cleaning and property damage. Therefore, leaving the property in good condition on departure as well as paying attention to the inventory are vitally important for tenants.
Although letting agents and landlords can't make tenants leave the property in exemplary condition, they can educate them about the importance of the inventory as well as encouraging them to attend check-out.
Good communication is also essential. According to mydeposits, 30% of initial disagreements between tenants and landlords or agents don't proceed to a dispute.
Disputes are usually dealt with by the deposit protection scheme used by the landlord and the organisation will look to carry out Alternative Dispute Resolution – whereby the issue is resolved impartially without proceeding to court.
However, if agents or landlords speak to tenants about issues with the property before the end of the tenancy it gives the tenants time to rectify the problems before moving out.
This could go a long way to reducing the chance of a dispute – potentially saving the tenant money and the landlord or agent time and hassle.