Deposits: only one in nine landlords thinks the five-week cap is enough
Nearly four in ten tenants don’t know they can challenge deductions
Only one in nine landlords believes the five-week deposit cap gives them adequate financial protection, while nearly four in ten tenants say they have no idea they can formally challenge deposit deductions, according to new research from LRG. The most recent Lettings Report, which draws on responses from 717 landlords and 860 tenants across England and Wales, finds deposits a persistent pressure point on both sides of the market – with landlords seeking greater security and tenants unaware of rights that already exist to protect them.
The five-week deposit cap, introduced under the Tenant Fees Act 2019, is not working for the majority of landlords. Just 11.4% say it provides sufficient protection. A further 33.5% say it covers most tenancies but not all, while 29.6% say it is not enough in any circumstances. Some 13.9% say it falls particularly short where a pet is involved, and 11.6% say they are now relying more heavily on rent guarantee insurance as a result. That is a picture of a cap that commands little confidence, set against a market in which deposits have risen in value: the Tenancy Deposit Scheme’s 2024/25 Statistical Briefing reports that 4.7 million deposits are now protected in England and Wales, with the average deposit rising to £1,175 – a figure that has climbed steadily alongside higher rents, yet remains capped at five weeks regardless of the property or the risk.
For tenants, the deposit remains a significant upfront burden at the point of moving. Some 44.1% say raising their last deposit was manageable but required planning. Around 21.3% had to borrow money or delay other spending to cover it, and a further 11% said it nearly stopped them moving altogether. Only 23.6% found it straightforward.
One option that could ease that upfront pressure is deposit replacement products, where tenants pay a smaller non-refundable fee in place of a full cash deposit. However, 25.7% of tenants were not aware the option existed. Of those who were, 31% said they would possibly consider one depending on cost, 16.7% said they would actively prefer it, and 12.8% have already used one. The appetite is there but awareness is limiting uptake.
The most significant knowledge gap in LRG’s survey relates to deposit dispute rights. Some 38.2% of tenants say they are not aware that they have the right to formally challenge deductions through a government-backed scheme. A further 25% have partial awareness but not the full details. Landlord awareness is higher but still incomplete: 21.8% did not know tenants had this right, and 31.5% have only partial knowledge of the process. In practice, disputes are far less common than landlords and tenants might fear: the Tenancy Deposit Scheme reports that just 1% of all protected deposits required formal adjudication in the twelve months to March 2025, with cleaning the most common source of dispute at 54% of cases. The process exists as a backstop, and it is used rarely.
Allison Thompson, Chief Lettings Officer, Leaders part of LRG, commented, “Deposits sit at the heart of the landlord-tenant relationship, and the data shows both sides have legitimate concerns that are not always being addressed. Landlords feel the five-week cap leaves them exposed, particularly where pets or higher-risk tenancies are involved. Tenants often do not know they can challenge deductions or that alternatives to a full cash deposit exist. That is a gap agents are well placed to close. Clear communication at the start and end of every tenancy – about rights, responsibilities and the options available, could resolve a significant number of concerns before they ever become disputes.”
You can download the full report here.
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