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Tenancy deposits with student lets

Readers may be interested in hearing about the solution to a problem experienced by a Landlord Law member, Roger, who lets to students.

Roger uses a Shorthold Tenancy Agreement (four students per house) and formerly obtained a Rent Guarantee from the parents. The procedure then (i.e. before the introduction of the tenancy deposit protection schemes) was that he would take a deposit (so that they did not go elsewhere and not tell him, which has happened) and wait for the parents to return the Guarantee (which can take weeks). However he was concerned about this procedure after the introduction of the tenancy deposit scheme and whether it would bring into play the requirement to protect the deposit within two weeks of payment.

Roger needs to ensure that the 4 students who have confirmed that they wish to rent a house do not change there minds while he is waiting for their parents to return the signed Rent Guarantee. This is critical because the university issue their list of houses available early in February and if landlords do not rent their house soon after this date it can be very difficult finding tenants.

Roger spoke to an advisor at My Deposits who confirmed that it would be acceptable to take a sum from the tenants, e.g. equating to the first months rent, inform them that this is a 'non returnable holding sum', and not take the deposit until the parents return the Guarantee. At this point the Tenancy Agreement can be finalised with the holding sum covering the first month's rent, the further sum paid at that time being used for the deposit.

My Deposits also confirmed via email that this procedure was appropriate. Their email stated:

"I can confirm this procedure as advised by my colleague is correct. When the monies paid by the tenants is classed as a ?non refundable holding fee? this would not require a protection with our scheme until the agreement is finalised and the monies is classed as the actual deposit for the AST agreement. You would then be able to proceed with your deposit protection with our scheme and provide the tenants with the prescribed information as required under the current legislation."

Full post as published by The Landlord Law Blog on June 24, 2009 (boomark / email).