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

Interesting discussion on lodging deposits from Property118

I 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?

Article courtesy of Property188 – why not get involved in the conversation and see what others think?

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