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 9 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?



Comments

by Industry Observer

13:42 PM, 12th April 2013, About 9 years ago

In terms of complying with Scheme Rules, yes.

But in terms of 30 days etc we are talking in terms of Statute. Even the Schemes cannot override that

by Robert M

15:39 PM, 12th April 2013, About 9 years ago

But the primary legislation says you must comply with the scheme rules (section 213(4)). Therefore, taking a ridiculous extreme, if the scheme rules state you must "donate" £10 to the Monster Raving Looney Party for each relevant tenancy (which actually in the circumstances may not be as stupid as it sounds) then you should do so. Moving back to reality, if the scheme rules say you must protect the full deposit within 30 days whether it has all been received or not then surely you must, as to quote IO:

"Whether anyone likes it or not the Law is the Law whether it intended subsequent consequences or not. It is no good talking about practicalities and inconveniences, sensible or not the Law must be adhered to."

Following Ayannuga v Swindells, if the scheme rules tell you to protect the full deposit within thirty days even if it has not been received in full then, in the absence of a strong argument otherwise, who is going to do otherwise?

Back to my usual stance:

1) What is the law aiming to achieve?

2) Bearing in mind the inadequacies of poorly drafted statute and secondary regulations and the very poor to practically useless advice offered by scheme administrators, am I adhering to the spirit of the law?

3) Are there any new legal precedents that I need to take into account and change my methods?

So far no posting in this thread has persuaded me that I should cease to protect all deposits in full within thirty days of the tenancy contract being signed, whether it is "new" money, "old" money or not yet received. In fact the recent changes to scheme rules have enforced my opinion of my approach. In saying this I am not convinced this is what the law aims to do or intends to do. Equally I am not convinced I am doing what the law says simply because the law is nonsense and you cannot comply with it in all cases.

In my little mind there remains (and always has) a grey area about holding deposits. Overall if your systems and paperwork are clear and fair then a holding deposit is not held under a tenancy agreement if it just indicates intention to contract. No doubt I may have cause to review this position in the future following another ruling by the men in wigs. Until then, my view is no binding tenancy, equals no contract, equals no deposit that needs to be protected BUT I make it clear that there is no contract until a written agreement is signed.

by

20:18 PM, 23rd April 2013, About 9 years ago

Dear Sir / Madam

Being a property manager I get asked this question a lot , the answer is that even if you take a holding deposit you dont have to register it until you receive either the full 4 or 6 weeks , it depends what you have requested from the tenant to pay, you would then have 30 days to register the deposit with the scheme that you elect to use . Please feel free to contact me at pm@riverhabitat.co.uk should you need any help .

Kind Regards

Michelle Dior
River Habitat
Property Manager

by Robert M

14:36 PM, 26th April 2013, About 9 years ago

I note that in Johnson v Old, the tenant paid a holding deposit in March 2009 and this was treated as part of the deposit under the agreement signed on 1 May 2009. The Court raised no criticism of this approach and did not suggest that the £300 should have been protected before 1 May. This would seem to offer some support to my view against Industry Observer's opinion?

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