Government proposals announced in the Queen’s Speech in June to cap tenancy deposits at no more than one month’s rent could lead to an increase in formal deposit disputes in the private rented sector (PRS), according to regulatory trade body the Association of Independent Inventory Clerks (AIIC).

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 – as part of several measures designed to “make the private rental market more affordable and competitive”, the government said.

But the AICC is 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”, leaving landlords with more damage and repairs to deal with, resulting in a higher number of formal deposit disputes.

Formal deposit 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,” said Danny Zane, joint chair of the AIIC. “However, we are concerned.”

Emma Glencross, joint chair of the AIIC, accepts that some tenants are finding damage and holding deposits unaffordable, and a cap on deposits will certainly help them when looking for a rental property. However, she is worried that the lower sums of money involved may encourage renters to take less care of their rental properties.

“Both landlords and tenants want to avoid deposit disputes at all costs and this government initiative could, in some cases, have unintended consequences,” she said.