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

Robert

You make some serious errors in your comments and because they may mislead others I will reply at length. This will then be my last post on this subject.

Change accountant. If you can’t ring him up and simply ask a straightforward question which has a yes or no answer, and if it is yes then you ask the maximum amount, you need to change accountants

Vague - unnecessary rudeness and if I may say so, foolish. I was told the £200 figure by a real, 'live' Landlord on an accreditation course about 6 months ago. I'd never heard it he says that is what his accountant said but was unsure if he saved the £200 or whether it was £200 of allowances, thus saving only £40. The £1000 becmes £200 at basic rate tax.

Your comment on voids is equally silly, we are talking about saving tax costs here, not folly in asking too much rent or instructing cheap useless agents.

For the umpteenth and final time you can call what in reality is a deposit whatever you like, if it quacks it's a dog and if it is at LAW a deposit it is a deposit. I don't call it anything Robert I am a consultant allegedly expert in the legal side of lettings, Statute and Regulations.

Return the "deposit" by all means but if it is a deposit, protect it. If it is an application or administration fee, genuinely so and probably no more than £200 then it is not a deposit. Your paperwork can explain whatever you think it explains until the ink fades Robert but if it is a deposit describing it as anything else, the tenant signing anything else, will not make it stop being one.

The Housing Act bit - good idea read the Statute s45 of the 1988 Act is a good starting point.

Finally the big one - how can you protect the full deposit if you have not received it? If it is your money you are making yourself unique - you are Landlord and Relevant Person in one!! You are also laying yourself open to a claim against you for the deposit and penalty because you have stated the wrong amount if the tenant hasn't paid what you are protecting.

The deposit is the deposit Robert and that is the amount that has to be protected. If you get £200 which is the deposit today, that has to be protected within 30 days of receipt. If you get another £200 in June then the deposit has become £400 and you have to re-protect (probably just a few keystrokes depending on Scheme) and then re-serve Prescribed Information.

Get another £200 in Sepptember and it is £600 and you repeat the reprotection process.

It's very simple Robert, you can use whatever system you like, but that is how it is.

Mydeposits as usual are wrong the protection if it is a deposit (no matter what you call it) has to be withing 30 days of touching the money. Agreements and tenancy start dates etc themselves have nothing to do with that timescale

Robert I agree in some respects the LAW is tricky on this, maybe could have been drafted better, but it is the LAW. What you think of it cuts no mustard in terms of having to comply with it.

Industry Observer

Well as it will be your last comment on this thread and you have made some accusations about what I have said, then I will reply.

You post that you are a consultant allegedly expert in the legal side of lettings, statute and regulations. It may well be the majority on the board know who you are, personally I have no idea. For all I know you may dress up in a suit and run courses for landlords. Whatever the case it seems clear by your own admission that you hold yourself out as expert.

Now in my experience, the problem with many courses and written articles on technical matters they are full of theoretical advice and short on practical help. That's fine if you want to be aware of the pitfalls but still leaves you with little help on dealing with reality.

For example, in your last but one posting above you state:

"Far as I am aware £200 can be claimed but am not sure if this is the allowances figure or the actual amount that can be saved i.e. the amount is a £1,000 maximum claim."

In reply I stated "with all due respect, this comment is so vague and without context so as to render it useless." In reply you state this is unnecessary rude and foolish. You then go on to say:

"I was told the £200 figure by a real, ‘live’ Landlord on an accreditation course about 6 months ago. I’d never heard it he says that is what his accountant said but was unsure if he saved the £200 or whether it was £200 of allowances, thus saving only £40. The £1,000 becomes £200 at basic rate tax."

Well, I'm sorry you find my comments offensive but I have to amplify them. Reading your comment I still have no clear idea what you are suggesting, except that you may be able to deduct an uncertain round sum allowance for some unidentified expenditure. This is about as much use as a chocolate teapot, except for the fact that it may prompt some to inquire more to see if there is a minute tax saving to be made. It seems that your expertise on this particular aspect is to repeat a comment picked up on a course without any verification of the source. Fortunately, you preface the advice with as "far as I am aware" so there is some qualification.

I only hope that your comments about tenancy deposits are a little more informed. It seems they are, but perhaps they are not suitably qualified and open to opposing views. Consider:

• "For the umpteenth and final time you can call what in reality is a deposit whatever you like, if it quacks it’s a dog and if it is at law a deposit it is a deposit. I don’t call it anything Robert I am a consultant allegedly expert in the legal side of lettings, Statute and Regulations."

• "Your paperwork can explain whatever you think it explains until the ink fades Robert but if it is a deposit describing it as anything else, the tenant signing anything else, will not make it stop being one."

Leaving aside the question of dogs quacking which frankly confuses my simple mind, these comments come across as a little dogmatic along the lines I am the expert, this is what I say and don't you dare disagree with me. I would expect you comments would be a little more guarded. For example, your last comment perhaps could be phrased:

• "Your paperwork can explain whatever you think it explains until the ink fades Robert. However, in my opinion if it is a deposit describing it as anything else, or the tenant signing anything else, will not make it stop being one as it seems clear to me that section x intends …..."

Even so if I may be so bold I still think you may be wrong. To quote from the TDS website:

"A holding deposit is not a tenancy deposit for the purposes of section 212 of the Housing Act 2004 and will not be required to be held under an authorised scheme. A deposit is only required to be placed in a scheme if it is money held (by a landlord or otherwise, e.g. an agent on his behalf) which is paid as security for the performance of any obligations of the tenant of this discharge of any liability, arising under or in connection with the tenancy. So if the tenancy agreement has not been entered into, and there are no contractual obligations resting on the tenant, the deposit paid is not a deposit for the purposes of the Act."

Now before you reply rubbishing this comment all I would say is that it has some merit and is published on a website dealing with the matter and must be given due consideration. Also, I would trump your Section 45 Housing Act 1988 with Section 212 Housing Act 2004.

Moving on to the "big one". How can I protect the deposit if I have not received it? Well, if you read my examples carefully, I have always received some of the deposit. There is nothing I can see in law that prevents protecting a deposit in advance of receiving the full amount and I make it quite clear in my second certificate that protection is not the same as acknowledging receipt.

I note that in the very first paragraph of your very first answer above on this thread answering my example 1, you say that I should protect (in effect re-protect) the £900 as soon as it is regarded as a deposit. Well, expanding that example, say I received the original deposit in February 2012 and protected it in March 2012 for a tenancy that started on 1 July 2012. Then, reverting to the other facts in my original example, I have three possible dates from which my thirty days deadline for protection should run for the new agreement starting on 1 July 2013:

1 The date in February 2012 when I received the funds. If this is correct I am well and truly stuffed as a year has passed. Reading s213(1) HA 2004 literally, the implication is that this is the date that counts!

2 The start date for the new tenancy which, despite the advice from mydeposits, I am not happy with. You also seem to agree that waiting until this date is dangerous.

3 The only other objective date I can hang my hat on is the date the new agreement is entered into. In my case this means when the new (second) written agreement is signed.

You now ask how I can protect the deposit if I have not received it? Well in my example 1, I see no alternative other than to have two protections for £1,800 in total when only holding £900 or risk waiting until the new tenancy starts, which I am not willing to do.

Having (I thought) suggested that I should protect the £900 twice over for the period of March to June this year I am a little dumfounded for you to now ask how I can protect money I have not received.

Having convinced myself that the safest approach (albeit not the most logical or clearly required in law) is to double protect the £900 (ie have outstanding deposits for £1,800 when I only hold £900) believe me it is quite easy to extend this argument to protecting all deposits in full within thirty days of the tenancy agreement being signed regardless of receipt of the full amount. I would not protect the deposit if none of it had been paid. Even I can see that would be nonsense.

Quite how you extend this to make me a relevant person I do not know. I have made it quite clear that I issue a second document that advises protection is not the same as receipt. If some tenant tries to take me to court for the payment of a part deposit not paid then I am more than ready, willing and able to defend this.

So in summary:

You accuse me of being rude, foolish and offensive when I challenge vague advice which you are unable to support, other than to quote a seemingly casual un-researched remark in a conversation. If you hold yourself out to be an expert in the legal side of lettings, statute and regulations this is not advisable.

You present your quite useful arguments as facts in stone rather than opinions, which I think is dangerous.

You appear to have contradicted yourself in the advice on this thread and now I am not certain when you think I should protect the deposit of tenants that renew signing the new agreement well in advance.

My intention in posting was not to antagonise what I assume to be an established and respected board member. However, to be fair to users, if you hold yourself out to be an expert in the legal side of lettings, statute and regulations (albeit allegedly) then you have to bear in mind some weight may be given to your postings. With status comes responsibility and I think you have let a duty to the board qualify all your comments unless you are certain they are correct.

All board users should be aware that in some cases advice is worth what you pay for it, and you pay nothing on this board.

(PS: I have been trying to guess your real initials and can only come up with DD.)

Robert

My apologies if I have offended in any way. My aim is not to insult, but to inform. On reflection my language may have been a bit harsh, my apologies.

Let's re-wind

I must have been too long in The Dog and Duck because I obviously mixed metaphors.

Ther tax allowance was a mistrake to refer to, it's not a matter of unresearched comments it is information I was given by someone who was claiming it, and on other courses since I have come across a few more Landlords aware of it. In a self managed property a Landlord can claim for the expenses that would have been incurred by an agent, such as paper and ink, fuel for property visits and so on. Small beer I grant you, but every penny counts.

I have asked the sqme questions as I posed of my accountant, not his field particularly as he doesn't have any BTL landlord clients, but he said he knew there was something that could be claimed. So I leave it to others to check if they are interested, which was the only reason I mentioned it.

As for my alleged 'expertise' my area is the legal side of lettings and all the stuff that flows in and out of it. After being rented housing manager for Nationwide BS I was regulatory affairs and procedures manager for a large national franchising company (in lettings!!) for 17 years and am now self-employed.

My comments are hopefully always well informed, certainly well intended, as I have contact with four or five real experts in the field whose brains I can pick and have been doing, fopr example, on rent in advance v deposit and TDP reprotection issues for several years.

TDS website is as bad as the other Schemes for giving advice - if only they would stick to what they were created for. I am well aware of the TDS opinion on holdimng deposits and whether or not they need to be protected. I am also aware that the view of everyone I consulted when that first appeared about three years ago from memory, was that it was very unsafe advice.

I am afraid section 212 does not trump section 45 as they deal with two different though related issues. Section 45 defines a tenancy, which can include an agreement for a tenancy (this is critical in long in advance student lets) and I would respectfully suggest it is section 213 that matters more.

If you are taking section 212 as meaning you have to comply with Scheme Rules and thus the TDS opinion on a holding deposit is somehow Law I am afraid I would have to disagree with that view completely.

In terms of protecting a deposit in advance of receiving it I have never heard of this approach before but thinking about it cannot see it can be correct. You are in effect telling a Scheme you need to insure say £900 when it is only £300 and becomes £900 later on.

Two questions for you here Robert if I may:-

1. Have you asked Mydeposits whether they think it is in order to insure £900 when you hold £300? To be honest I probably wouldn't believe what they say but it would be interesting to ask.

2. What would happen if you were using DPS - do you think you could use the same technique?

3. What do you put in the PI for the deposit amount?

I suggest we continue our discussion separately. If you wish to please email me via Mark and I will respond as I have now removed the notify me check on P118 on this item

By the way what is DD - Daffy Duck?!!

I agree that Section 45(1) defines a tenancy, which can include an agreement for a tenancy which is critical in long in advance student lets. So the process, using made up figures, is as follows:

• The students view the house and agree to take it.
• They complete application forms and make a payment to hold the property.
• The application forms make it quite clear that there is a fee of £50 per student and a deposit of £300 per student will be required under the tenancy.
• A minimum of £100 per student is requires on application (they may pay the full £350 if they wish).
• The students are told that they will be required to sign a written tenancy agreement and if they withdraw any time after application but before the tenancy agreement is signed, then they will forfeit £50 each.
• Otherwise, if the students sign the tenancy agreement, they are told anything they have paid in excess of the £50 fee counts towards the deposit due under the agreement.

Now I can assure you that in these circumstances a judge will not enforce the tenancy unless and until the agreement is signed. At least, I relied on this several years ago when a landlord changed their mind about renting after an application had been submitted. The tenant tried to enforce the tenancy but was told by the District Judge that it was clear that no agreement had been entered into.

If you are right, any prospective tenant can come along pay a full deposit, change their mind a day later and get a full refund and then five years later claim the deposit was not protected and file for the compensation.
Furthermore, to carry your argument to its logical conclusion it would appear you are suggesting that any agent or landlord that takes an application form and holding deposit subject to satisfactory references is required to protect that deposit even if no references are forthcoming and the tenancy does not go ahead. This would appear to be necessary as you seem to argue that the payment is in connection with a tenancy agreement.

Now I am not saying this is not theoretically possible, ie I am not saying that the legislation absolutely prevents such nonsense. What I am saying is that a judge should and would look to the circumstances. This is where my point about academics presenting arguments about the theoretical extremes of the law are not necessarily providing a useful service. I bet if you looked back to advice and discussion group postings before Gladehurst Properties v Hashemi and similar cases you would see lots of gloom a doom about compensation potentially due after tenancies had ended which proved not to be the case under the old legislation.

You also need to read Section 45(2) which states that "… the beginning of a tenancy is a reference to the day on which the tenancy is entered into or, if it is later, the day on which, under the terms of any lease, agreement or other document, the tenant is entitled to possession under the tenancy." It comes as no surprise that the law recognises a possible difference between the start of a tenancy and the date a tenancy was entered into. But the key point here is: when is the tenancy entered into?

If I complete a job application I have not got the post until certain procedures are carried out. This is may seem obvious and expected. I would argue that provided the application process is clear, the same applies to a tenancy.
I agree that all my arguments can be argued against. However, if there is one thing I have learnt it is that when dealing with legislation (particularly new legislation), in reality the experts in suits are no better at anticipating the court's interpretation of the law than the informed man in the street. For example, if I listened to food experts all the time, there would be nothing left to eat.
For all these reasons, unless and until I persuaded otherwise (which case law may well achieve), provided the application process is clear I am happy to believe that in order to be required to protect a deposit you must have both a payment and a binding tenancy agreement, which is my case is the signed document.

For now, I simply do not care if a holding deposit quacks like a dog – life is far too short to be worried about extreme theoretical interpretations unless and until they become real facts. Until then back to my examples ….

I have lost the will to live and contacting mydeposits for further advice is out of the question. The quality of the advice given is absolutely appalling; they cannot answer anything out of the ordinary; ask the same question twice and you get three opinions and they will not put the reply to any "challenging" question down in writing.

So the answer is in Section 213? Well let's look at that section.

Section 213(1): "Any tenancy deposit paid to a person in connection with a shorthold tenancy must, as from the time when it is received, be dealt with in accordance with an authorised scheme."

So you must have a deposit paid and it must be in connection with a shorthold tenancy. If I understand him correctly, Industry Observer seems to say any payment made in advance of a legally binding agreement counts so (being very extreme) your application fees etc must be protected even if no tenancy results. I think there is scope to say that in order to be in connection with a tenancy, you also need a binding tenancy agreement.

It gets worse though, as under Section 213(3) (as amended) "Where a landlord receives a tenancy deposit in connection with a shorthold tenancy, the initial requirements of an authorised scheme must be complied with by the landlord in relation to the deposit within the period of 30 days beginning with the date on which it is received."

This is where Industry Observer seems to completely run out of steam. Back to my example one which for completeness I will repeat.

I rent to students who look well in advance of the summer start date. Assume I have a student house with three students A, B & C. In February 2012 they paid £300 each for a tenancy that started on 1 July 2012. I protected it in March 2012. 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.

When do I protect the deposit for the second agreement, ie when does my 30 days start to run? Well taking the literal approach, I should have protected the deposit for the new tenancy with 30 days of receiving it in February 2012. In other words I should have protected the deposit twice last year in anticipation of the possibility of a second tenancy with the same group. This, I suggest, is clearly nonsense and I will continue to argue this even if I do not describe myself as an expert. However, I have to accept I simply comply with the law in this case when literally interpreted. It is quite normal commercial practice to renew an agreement and allow the deposit to roll over. The obvious answer (if totally impractical for a student tenant) is to ask them to pay a second deposit. (Incidentally I am ignoring the fact that the legislation changed in April 2012 for the purpose of the example.)

So what is the answer? In his first posting above IO says:

"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."

Now when will the money be regarded as a deposit for the second year? According to IO any payment that can vaguely be attached to the possibility of a potential future tenancy must be treated as a deposit from the day of receipt. Sorry that was a year ago, so I am stuffed. This is where I rather like my objective basis of using the date the new contract is signed. It seems to me to make some sense, though I end up with two simultaneous protections for the same £900.

But then IO comes back later:

"…. how can you protect the full deposit if you have not received it? If it is your money you are making yourself unique – you are Landlord and Relevant Person in one!! You are also laying yourself open to a claim against you for the deposit and penalty because you have stated the wrong amount if the tenant hasn’t paid what you are protecting."

Leaving aside the apparently ridiculous claim that I am making myself a Relevant Person, having being told that I should not wait until the start date of the second tenancy, I should not protect money I do not have and I should have protected that money for a second time within 30 days of having received it I last year, then I shall have to admit I am none the wiser.

The law in respect of tenancy deposits is simply not up to the job. Where statute is inadequate the man in the street must simply do his best and wait for the mess to be sorted out. I cannot recall seeing anything like this since the HMO washbasin fiasco. What worries me is that the promoters of deposit protection, Shelter, now appear to want to ban agency fees and reintroduce rent control.

Luckily Robert you obviously know all the answers. So why ask for advice, comment or opinion in the first place. You just do what you think is right and that is the end of the matter.

I will debate and discuss no more, there is no point.

Let's all wait for the CoA decision in Johnson v Old thohg I fear no matter what the decision it may still not deal with all the issues or satisfy all the arguments

Oh, I don't have all the answers which is why I posted my original query. Instead, I have a dilemma where, acting on a normal commercial basis, I cannot comply with the literal interpretation of the law. Therefore, I do my best to comply with the spirit of the legislation whilst waiting on the sidelines for the actual answer. I posted to see if any clarification would emerge.

You have to admit that you have significantly contradicted yourself in the space of a week on this thread. That's fine, thought processes develop. However, with all due respect you are the one that has held himself out to be the expert who is right. I just do not see how you can be so confident in the light of such uncertainly. You have opinions; that's fine, you hold them strongly which is also fine. However, you don't have all the answers (or all of a sudden you have decided to keep them to yourself) and as I think you have conceded, you should not present your opinions as unquestionably correct unless that this so beyond ANY doubt. Frankly, with apologies all round in advance, some of your comments are arrogant and that's just reading this thread. You clearly have a significant contribution to make but are spoiling your contributions somewhat.

I really doubt that Johnson will provide all the answers as I am not certain all the questions have been asked. I have spent years as a legal professional interpreting legislation and cannot recall a situation where a third level of legislation (ie scheme rules) kicks in with such importance. Frankly, the idea that the question of whether a pamphlet should have been handed over ended up as far as the Court of Appeal summarises the inadequacies of the current position far better than I can.

Danger of peace breaking out between us Robert!!

My offer of email initially via Mark still stands, be back to you Monday.

I agree 100% with your last comments, and sadly the probability Johnson will not provide all the answers we could do with

In answer to the question as to how you can protect a deposit that has not been received in full, both DPS and mydeposits now suggest that where a deposit is paid in instalments (example 3) the full amount should be protected within the thirty day deadline even if it has not been received in full.

Robert

I repeat:-

1. Never trust what a Scheme says even about their own Rules!!

2. How logically can you possibly protect a deposit that does not exist? My concern is the PI has to be issued within the 30 days - what amount do you put in it? How can you have a PI form in conflict with the amount protected.

I'm sorry and it may be daft and inconvenient and a nuisance but I just do not see how you can possibly protect and state different amounts in the two parts of the exercise. And above all I fail to see how the PI can state anything but the truth and actuality as it is at that point.

So the tenants get one piece of paper from a Scheme that says deposit £900 and another piece of paper from you that says £300

I will consult better brains than mine and be back to you

Well actually I was reading the rules - not listening to Wayne or Sharon's interpretaion of them on a "helpline". Now according to the Court of Appeal you must follow what the rules say ....