Student Landlords/Agents – When do you register a “new” deposit?

Student Landlords/Agents – When do you register a “new” deposit?

13:36 PM, 21st March 2013, About 11 years ago 44

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Readers QuestionsI recently had to renew my membership of mydeposits. Part of this process involved sending in a copy of my client deposit account bank statement. Immediately back came the comment to the effect that “at date X the balance on the account was £x which is £5k less than the deposits protected, explain yourself.”

Now I let to students. So the pattern works as follows:

In January 2012 groups of students started hunting for houses for the year 1 July 2012 to 30 June 2013. Obviously(?) all their deposits are now paid and protected.

In January 2013 the new season starts. So at present I am sitting on tens of thousands of deposits for tenancies that will start on 1 July 2013. Some of these agreements will not yet be signed.

For now I am happily going along with the theory that a deposit paid before signing the agreement is a holding deposit, most of which will be returned if the agreement is not signed. All this is covered in the application paperwork. So my concern only includes those deposits held for agreements already signed but which start on 1 July 2013.

Now I have always thought that if I have a deposit held on an agreement signed 1 February 2013 but where the tenancy starts on 1 July 2013 it should be protected by the end of February (OK 30 days but let’s not be pedantic).

So far so good? However, in some cases the same group will renew for a second year so I may have two agreements for the same (say) three students but only one deposit. Let me try some examples:

Example 1

Assume I have a student house with three students A, B & C. Each has paid £300 deposit so I hold £900 which is protected and the current agreement ends on 30 June 2013.

On 1 February 2013 the same three students enter into a new agreement for the year 1 July 2013 to 30 June 2014 but no further deposit is paid.

Now I have taken the view that the new agreement should be protected by now, so I will have two protections for £1,800 but only £900 in my client account. Apparently, I have now been told that I only need to protect the deposit when the new AST begins. (Note the way I have been advised implies this is optional, ie I do not need to have the second agreement protected now, not that I should not have the second deposit protected now.)

This is the reason that my client account appears to be underfunded, but is not.

Let’s move on.

Example 2

Assume I have a student house with three students A, B & C. Each has paid £300 deposit so I hold £900 which is protected and the current agreement ends on 30 June 2013.

On 1 February 2013 students A, B & D enter into a new agreement for the year 1 July 2013 to 30 June 2014 and D pays £300 deposit. As far as I can see I have received a deposit under a new tenancy and I should protect it within 30 days of 1 February. I have no intention of duplicating protections so I would protect a full £900 by (say) the end of February, meaning I had protections totally £1,800 but hold only £1,200 in cash until the end of the current tenancy.

Hold on to your keyboard as I am beginning to get into the swing of this.

Example 3

I have a new house which I let on 1 February 2013 to three students E, F & G for a tenancy to start on 1 July 2013. The students can only afford to pay £100 each of their £300 deposit each on signing the agreement but will pay the balance of £200 each on 1 May 2013. Again, I have no intention of duplicating protections so I would protect a full £900 by (say) the end of February and always thought that was required and expected.

As I understand it protecting a deposit is not the same as saying you have received it. Mydeposits used to say this. Therefore, in my own little world I have been quite happy with my arrangements. However, with mydeposits telling me I can delay protection until the tenancy start date I am slightly confused. I have put these three examples to mydeposits and asked for a written response, with a request that they will indemnify me against all my legal costs and compensation if I follow their advice and some judge disagrees. Silence is deafening.

So over to the forum. What is your understanding of the requirements? Am I being too cautious, or am I totally wrong?

Would your answer be different with another protection arrangement?

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Industry Observer

13:57 PM, 21st March 2013, About 11 years ago

Example 1 advice wrong - if it is a new agreement and if you hold old money being re-protected or new money for the second one then you must protect AND serve fresh PI on the second one WITHING 30 DAYS OF THE MONEY BEING REGARDED AS A DEPOSIT. Normally when you touch it but in this instance you may not actually touch it, but it will be a new deposit.

TDP dates are NEVER from tenancy commencement ALWAYS from when the deposit was "received"

Example 2

Protect what you like but any new money not protected must be protected. I'd have thought it would be £300 but it could be the £900

Example 3 you protect what you have been paid (or received again when the existing tenancy ends and a new one begins, renewal or periodic) within 30 days of that incident arising where the deposit needs protecting.

So in this case protect the £300 within 30 days and serve PI; then protect the second £600 within 30 days of receiving that and re-serve fresh PI within 30 days as well showing £900 now held.

Example 3 seems the easiest and most straightforward so maybe I am missing a trick. If so Mary Latham will pick up on it I am sure.

One serious piece of advice - only ask any TDP scheme about their own Rules and what you need to do to comply with those so they don't expel you as a member - like having to pay money in within a certain timeframe for a dispute to be judged.

NEVER take their advice on anything remotely legally related and dictated by the 2004 and 2011 Acts

Mary Latham

14:13 PM, 21st March 2013, About 11 years ago

I too let to students and understand what you have explained as the normal way that we operate with this client group.

This is my take

The original deposit is protecting the existing tenancy until it ends. I do not take any further funds and this deposit will be "transferred" the the new tenancy.

I cannot "touch" the original deposit until the exisiting tenancy ends and therefore it cannot be "used" to cover the new tenancy until the existing tenancy ends and the new one begins.

There is no problem for me as a landlordsprotecting both deposits from the time that the new AST is signed but for a Letting Agent this is a different situation and therefore, in my opinion, the deposit that has been paid is protected and will continue to be protected until it is unprotected (with MyDeposits some schemes differ) If the Agent protects the deposit at the end of the original tenancy and immediately unprotects the original deposit there is no time when the money paid as a deposit is not protected. At this point the new paperwork can be sent to the tenant to confirm that the deposit continues to be protected.

I would be very interested if anyone thinks that Letting Agents have any other option to comply with the law and meet the scheme rules of their chosen protection scheme.

Mark have you asked the deposit protection schemes to comment?

I am beginning to feel like Frankenstein - tenancy deposit protection legislation was put in place to ensure that tenants deposits were safe and that they have access to free arbitration in a dispute. Poorly worded legislation has turned this into a monster.

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Mark Alexander - Founder of Property118

15:28 PM, 21st March 2013, About 11 years ago

Hi Mary

I would love DPS to comment here but they have a policy not to communicate on forums other than Twitter for fear of their identity being abused. However, I am working on a cunning plan to overcome that. It was inspired by an offline discussion with Industry Observer. He suggested that I somehow find a way to create a "Trusted Commenter" badge or the like so that people could identify between common opinion and trusted advice. It's not going to be easy as our trusted commenters often disagree with each other on things too!

Nevertheless, that influenced some ideas I've been having regarding Property118 memberships. Initially I was thinking of two categories of membership 1) Private Members and 2) Business Members.

Each member would have their own profile and the two categories of member would have different benefits (I'm still thinking this though but I'm forming an interesting list). One example of a membership benefit would be a link to the members profile page with every comment left, together with their membership status next to their comments. The site would still be open for anybody to use and none members would simply be flagged as a Guest. Obviously I will have to work hard to come up with enough good reasons to justify people wanting to become a member and then the functionality will have to be built to make it happen so please bear with me on this.

Business members would have an additional area in their profile where they could explain how their business could assist Property118 readers and they would also have links to their websites.

Industry Observers suggestion lead me to thinking that we could also create an honorary members section. This membership category would be reserved for the likes of you, Industry Observer, Tessa Shepperson, Ben Reeve-Lewis, regulators such as TPOS, ARLA etc., deposit protection providers, landlords associations and others who carry high levels of credibility in the industry.

I'd be interested in any feedback on this idea.

Industry Observer

15:31 PM, 21st March 2013, About 11 years ago

It's too many providers and too many schemes from them that have created the problem Mary!!!

Mark Alexander - Founder of Property118

15:34 PM, 21st March 2013, About 11 years ago

@Industry Observer, I don't agree. The extra competition is driving cost down and that's a good thing, the schemes are being forced to become more competitive. The problem is what Mary said, badly drafted legislation.

Jan Martin

16:00 PM, 21st March 2013, About 11 years ago

I have a recent situation with a tenant moving on who has not paid me the last months rent and is expecting me to take it from the deposit.
I have always thought that a tenant is going to be decent whether I take a bond or not. Now with all the fuss with the bonds I do wonder if others really feel they need to take them. They dont really mean a thing if tenants not decent do they ? Interested to hear what others think.

Mark Alexander - Founder of Property118

16:07 PM, 21st March 2013, About 11 years ago

I'm coming to the same conclusion very quickly Jan. We can always go to court to recover damages and unpaid rent of course. I'm investigating insurance options which would pay out to cover this. So far I've found plenty of warranty companies offering such products but they are expensive and unregulated. Therefore, it is questionable whether they would actually pay out. Ideally I will find a regulated insurer who will take a commercial view on this and realise what a massive market they could tap into. What I would really like to persuade them off is that they should make this product a loss leader, remember the 8p tins of beans the supermarkets did? Insurance Companies could do the same thing for landlords, i.e. for the price of deposit protection they could insure the risk. They may well make a loss but just think about how many new clients they would have to market to for landlords insurance, home insurance, car insurance, holiday insurance etc. etc. etc.

Robert M

16:23 PM, 21st March 2013, About 11 years ago

Well IO confirmed what I thought (well to be honest knew) that waiting until the start date of the new tenancy is somewhat risky. It's just when Sharon or Wayne on the help desk tell you that is OK I begin to question my own judgement.

I really do not want to incur multiple protection fees for one tenancy so sort of feel comfortable protecting the full amount in one go. In other words in all three of my examples I would protect £900 in full within thirty days of the agreement being signed, regardless of what I had received.

I issue the certificate, the tenant information and a third document which is my own version of a certificate but has more information than a mydeposits document and makes it quite clear that my issuing protection paperwork is not the same as confirming receipt of the full amount.

Somehow, I would feel more comfortable explaining why I protected more than I had actually received at the relevant date and why I had issued more papers than required by the scheme rules.

That just leaves the question of whether a holding deposit can ever require protection, which I understand is being addressed in the CoA around now?

Mary Latham

19:09 PM, 21st March 2013, About 11 years ago

A holding deposit, or a retainer, stops being a retainer when the AST is signed because once there is a contract in place the property is not being held or retained and at that point the money is held by the landlord to cover losses or damages - its a deposit and must be protected.

Many landlords face the problem of what to do when a part payment is made or where a tenant spreads the payment of the deposit over the first two or three rent payments. In my opinion the only option open to us here is the custodial scheme where additional funds can be placed as they are paid and each tranche is protected as it is recived by the landlord at no cost for the protection. If we were using an Insurance option like MyDeposits we would need to put in a new protection on each tranche and that is going to be expensive. If we protected the amount stated on the AST before it was paid a tenant might be tempted not to pay the balance but to use the deposit protection certificate as evidence of full payment.

I have had many discussions with landlords about whether taking a deposit is worth the bother. I try always to return 100% of a tenants deposit and most of the time I manage to do this - I am prepared to take the hit on some damages/losses particularly with a long term tenant. I do not take deposits so that I can cover my losses/damages I take them to level the playing field. I am holding something that the tenant wants back and he is holding something that I want back in reasonable order. If the landlord does not take a deposit what would prevent a tenant just stopping the last months rent or taking the belongings that he wants and leaving the landlord to throw out the rubbish? Yes we can take legal action to recover losses but I do not want to do that, it is expensive and time consuming.

There have been very few occassions where I have taken a property back ready to let, even the best tenants don't leave it clean enough for me to let a new tenant move in. I expect to clean and touch up/replace items etc. that is all part of my overheads but what I don't want to spend the time and cost of rubbish removal, emptying cupboards/fridges/gardens/sheds etc. I take a deposit to prevent all that.

Mark In my opinion if a landlord accepted an insurance that would cover losses and damages tenants might just think "Its insured why should I care".

I agree 100% with IO a tenancy deposit scheme can advise on their rules but not on the law.

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Mary Latham

19:20 PM, 21st March 2013, About 11 years ago

Mark on the issue of flagging up different categories of posters. In my opinion anyone who reads information on a forum should take it as just that "information" or "opinion" and should never rely on what is said without taking appropriate advice and where appropriate reading legislation or regulation - this is why I opten post a link to a source document. A discussion forum is a place to chew the cud, give information, opinion, help and support. People who read the content of threads will soon become aware of who they can trust, who most closely works in a way that they want to work, who has experience of similar situations etc. but no forum pretends to offer free legal advice unless it is run by legally qualified people - and often they disagree with each other.

When I post I do so an experienced landlord - I don't pretend anything more and I would not want to be "flagged" as anything else.

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