As part of the Queen's Speech earlier this summer, the Government unveiled its draft Tenants' Fee Bill, which included details of the impending ban on letting agent fees charged to tenants as well as the first mention of a cap on holding deposits and security deposits.
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.
The National Landlords Association estimates that approximately 40% of current security deposits exceed the proposed one month rent cap.
A full draft of the Tenants' Fees Bill is expected to be published later in 2017, with legislation being introduced at some point the following year.
The AIIC says that while a cap on deposits will help tenants during the initial stages of a rental, the lower sums required could lead to an increase in the number of formal deposit disputes.
Danny Zane, Joint Chair of the AIIC, said: "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."
In this scenario, landlords are more likely to make deductions from tenants' deposits which, if challenged by the renters, could lead to a formal deposit dispute.
Some landlords currently ask for higher deposits for their own peace of mind, to cover high ticket furniture items or allow pets.
As other industry bodies have already explained, a cap on deposits will stop them being able to do so and could therefore discourage landlords from letting or adversely affect the standard of private rental properties.
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.
