You may get asked about these at it is a big discussion topic on the forums at the moment. As you know you must never take the equivalent of more than 2 month’s rent as a deposit (over 1/6 of the annual rent) or else you risk creating a premium lease, and therefore potentially giving the tenants the automatic right to sublet, and a possible automatic 20 year term.

The law is not clear on the subject, it appears that this only applies if the contract becomes “contractually periodic” which it could if the landlord agrees monthly extensions and takes a premium for example, and it appears to only apply to leases non determinable before 20 years, but to be safe these scenarios are best avoided, as if we were to take a high deposit and enter a contractual term, then a clever lawyer might argue we intended to create a premium lease and therefore the tenant has the right to stay and sublet for 20 years!

So to be safe never take more than 7 weeks deposit

More information on the subject here and there is a big discussion on the subject on property118 too.

Sally Lawson is a Leading authority on Residential Lettings and Management in th UK, Sally has ran Lettings Branches since 1990, and let over 5000 properties during that time. She has also worked as a consultant and trainer to Letting agents nationwide. Sally is actively involved with ARLA (the association of residential letting agents) as a regional representative and Media Spokesperson for the group, and runs the rapidly expanding nationwide Concentric Lettings operation and Franchised network.