Tenant Fees Bill

Written evidence submitted by iQ Student Accommodation (TFB46)

In general iQ Student Accommodation (iQ) is in favour of the Government’s proposals and is of the opinion that the Bill will go a long way towards addressing some of the sharp practices in the private rented sector (PRS). Where we have an issue is the treatment of Holding Deposits covered in Schedule 2. In common with much of the purpose built student accommodation (PBSA) sector iQ asks for a Holding Deposit from each prospective tenant. This is generally equivalent to two or three weeks’ rent. At the commencement of the tenancy, most commonly when the student applicant moves in, the deposit is converted to a Tenancy Deposit which is provided for in the Bill under Paragraph 5, Schedule 2.

Most PBSA providers will start to take Holding Deposits many months before the actual tenancy start date and in the case of iQ in the proceeding November. This allows our current tenants (who are on fixed term tenancies of between 42 and 51 weeks) a degree of certainty in respect of rebooking for the academic subsequent year. The Bill permits this if a Deadline for Agreement is established beyond the proposed statutory 15 day deadline as provided by Paragraph 2, Schedule 2.

The deposit is designated as a Holding Deposit to avoid the need to undertake immediate registration with a Tenants Deposit Protection Scheme which is a cumbersome task for most PBSA providers who operate many thousands of rooms. Furthermore, significant numbers of students do not obtain the necessary exam grades to go to their first choice university (all are refunded in such circumstance) so it is more efficient to bulk protect deposits immediately after students move in thus avoiding issues with statutory deadlines for registration and serving the prescribed information required under the scheme.

The Holding Deposit is non-refundable (save for in the circumstance above) and is set at a level to discourage ‘no shows’. After the start of the academic year, it is extremely difficult to fill empty rooms in PBSA which, under planning, cannot be let to non-students, so a proportionate disincentive to cancellation is seen as essential for the smooth operation of the sector. The Bill, as drafted under Schedule 2, Paragraph 4, will require this Holding Deposit to be repaid if a tenancy agreement is not entered into – in this case if the student tenant fails to move in. This will have the effect of providing the student applicant the ability to cancel his/her agreement with impunity at the eleventh hour and potentially result in significant losses through ‘no shows’.

Paragraph 3, Schedule 1 further provides that a Holding Deposit cannot exceed one weeks rent without it being a Prohibited Payment. This further undermines the purpose of taking a Holding Deposit in the PBSA sector although if Schedule 2 is enacted this will be academic.

The PBSA sector operates very differently to the rest of PRS, is dominated by large, institutional landlords who take compliance seriously and in general seek to minimise charges to their student customers whom they compete for in the market place. The drafting in respect of Holding Deposits will have substantial impacts on the sector if unamended.

June 2018

 

Prepared 7th June 2018