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Tips for student deposits

The start of a new academic year is fast approaching and many students across the country will have already begun the search for next year's accommodation. Over the coming weeks, as parents and students alike hand over cheques for deposits, many may not realise that from October next year such an easy arrangement will no longer be possible.

In the meanwhile, the National Landlords Association urges landlords and student tenants to play fair on deposits and offers some tips to ensure that the exchange of deposits goes as smoothly as possible.

New regulations

As part of wide ranging changes to regulation of the private rented sector under the Housing Act 2004, deposits will have to be placed in an authorised tenancy deposit scheme. Two forms of tenancy deposit scheme are envisaged: a custodial scheme and an insurance scheme.

Under a custodial scheme landlords will pay deposits into a specified account. The money will then be kept in the account until the end of the tenancy. Either the landlord or tenant can apply at any time after the tenancy has ended for the deposit to be returned to them. If both parties agree on how the deposit should be split the administrator of the scheme has to pay out the amounts within 10 days of receiving the request.

In the case of an insurance scheme the landlord keeps the deposit on the basis that at the end of the tenancy an amount agreed between tenant and landlord will be paid to the tenant. The insurance will come into play if, at the end of a tenancy, the landlord does not pay back part or all of a deposit within 10 days of a tenant's request. If this is the case the tenant can approach the scheme administrator. The landlord will then be required to pay the amount into an authorised account within 10 days of receiving notice from the administrator. Once a dispute has been settled the administrator must pay the tenant within 10 days. The insurance will come into effect if the landlord fails to pay the deposit into the account as requested.

Bond of trust between landlord and tenant

David Salusbury, chairman of the NLA said: "Until now the exchange of tenancy deposits has relied on a bond of trust between landlord and tenant."

"Undeniably there are a few bad eggs out there, but many landlords appreciate that when a tenancy ends a tenant may need the money to put down a deposit on another property, thus landlords will do their best to return deposits quickly and fairly."

"Whenever possible I prefer to return deposits within 48 hours of my tenants moving out, which ties up all loose ends and makes life easier for the tenant. Unfortunately, in the case of a custodial deposit scheme such a swift exchange would be extremely difficult."

Meanwhile, until the deposit schemes come into affect the NLA suggests a number of tips that landlords and tenants can adhere to in order to ensure that the exchange of deposits goes as smoothly as possible:

• In the excitement of moving in together students may forget to ensure they have taken a full inventory of their new accommodation. It is essential for both tenant and landlord that a thorough inventory is taken at the start of a tenancy as this can help to prevent wrangles over the deposit when the tenancy ends. An inventory should also be taken when a tenancy comes to a close so that any necessary deductions can be agreed upon by both parties.
• Students also need to appreciate that whilst fair wear and tear is one thing, unreasonable damage to fixtures and fittings will have to be paid for out of the deposit. The NLA advises all tenants to report any accidental damage or repairs to their landlord as soon as possible. Honesty is always appreciated.
• For landlords it is a good idea to get parents of students to guarantee the rent, shortfalls in rent and damage to property will therefore be covered by the parental guarantee.
• The NLA code of practice says that if required, landlords should provide a written statement accounting for and explaining any deductions from the deposit. Tenants should also be told of the steps they can take if they are not satisfied that the deductions are fair and reasonable.

David Salusbury continued: "The NLA has consistently recognised that there are problems over tenancy deposits, but in the end the best way for landlords and tenants to settle any issues with is to negotiate. This system has worked well in the overwhelming majority of cases up until now."

"The NLA is concerned that the new government legislation will place little faith in the relationship between landlord and tenant and that mandatory tenancy deposit schemes will make the whole process a lot more difficult for all parties concerned."