Guide to deposits for student lets

Renting to students can provide a stable source of income for property managers. However, as student tenants are typically younger, may not have rented before, and may not be completely clear on their responsibilities as tenants, the possibility of damage to your property or belongings is higher than with residential tenants. Due to this, it’s important that you charge a tenancy deposit when renting to students. 

We explain everything you need to know about charging tenancy deposits for student lets, including your legal responsibilities as a property manager, and how you can reduce the likelihood of a deposit dispute at the end of a tenancy. 

Why should you charge a tenancy deposit?

A tenancy deposit is a sum of money paid by tenants to the property manager or landlord before moving into a rental property. The deposit acts as security for the property manager in case the tenant causes any damages to the property or falls into rent arrears. Essentially, the deposit acts as an additional level of insurance in case you need to pay for maintenance work, repairs, or cover upaid rent. When letting to student tenants who might be new to the rental market, this is important to have.

Property managers and landlords aren’t legally required to ask tenants to pay tenancy deposits but it is a good idea to do so. At the end of the tenancy, the deposit will be returned to the tenant minus any necessary deductions. 

How much should a tenancy deposit be for a student let?

According to the Tenant Free Ban 2019, you cannot legally charge more than five weeks’ rent for a tenancy deposit in England and Wales for properties with an annual rent of below £50,000. In Scotland, tenancy deposits are capped at two months' rent. 

While five weeks’ rent is the maximum amount for a tenancy deposit, some property managers choose to charge a lower amount than they typically would for residential tenancies as students might have more financial restrictions. This is completely at the discretion of the property manager.

What if student tenants cannot afford a tenancy deposit?

Often, student tenants are reliant on their student loans to pay their rent and deposit. They may not have savings and therefore might struggle to cover the cost of the first months’ rent and deposit. 

If you feel comfortable, you can lower the tenancy deposit for student lets to accommodate this. Alternatively, students may have a parent or guardian who can assist with the payment of the deposit. This is a common option, particularly as most students will be required to provide a guarantor to cover the rent if they fall into arrears anyway.

Do you have to protect tenant deposits?

The Housing Act 2004 requires property managers and landlords to store all tenancy deposits in a government-authorised Tenancy Deposit Protection scheme for the duration of the tenancy. Within 30 days of receiving the deposit, you must inform your tenants which scheme you have used to protect their deposit.

Deposit protection schemes 

Third-party deposit protection schemes will hold and protect tenants’ deposits throughout the tenancy. If a deposit dispute arises at the end of the tenancy, they can also offer independent services to help resolve potential disputes at the end of the tenancy, if needed. 

In England and Wales, you can use one of the following:

• mydeposits
• Deposit Protection Service
• Tenancy Deposit Scheme

In Scotland, you can use:

• mydeposits Scotland
• Letting Protection Service Scotland
• Safe Deposits Scotland

What are the most common causes of deposit disputes?

According to figures from mydeposits, the most disputes at the end of student tenancies are over the required standard of cleaning not being met. This makes up 44% of all disputes. 

Tenants have a responsibility to leave the property in an equivalent state to the one they found it in at the beginning of the tenancy, accounting for reasonable wear and tear. This means that they should clean to the same standard as was recorded in the check-in report. You cannot require tenants to pay for a professional cleaning service, but you may make deductions from the deposit to pay for one if they did not meet the standard of cleanliness delivered when they moved in.

The next most common cause of disputes in student lets are repairs and decoration, accounting for 13% of all disputes. Remember, tenants do not have to pay for reasonable wear and tear, which could include scuffs or light damage to furnishings. However, you can deduct from the deposit for things such as stains, tears or damage to the property or furnishings, and missing items that were previously recorded in the inventory.

How to reduce the chance of deposit disputes in student lets 

If you want to avoid deposit disputes (and avoidable damage to your property!) the best thing to do is to properly prepare. Making some easy adjustments to accommodate student tenants and their typical behaviours could save you a lot of time, money, and hassle in the long run.

Prevent against mould

To avoid mould build-up, make sure that your property is property ventilated. Before tenants move in, ensure that the property is well-insulated and can be ventilated properly. Make sure all your bathrooms have functioning extractor fans, windows provide proper insulation (double glazing ideally), rotten window frames are replaced, and gutters do not have leaks. Simple steps such a decorating your property with wipe-clean and mould resistant paint can help students to stay on top of cleaning too. 

Furnish with hard-wearing furniture and fittings

Poor quality furniture is more likely to break. Invest in durable, hard-wearing furniture to avoid unnecessary damages. These choices don’t have to break the bank, you can find plenty of sturdy furniture in affordable stores like IKEA and Argos. 

Make furnishings easy to keep clean 

Let’s face it, students are not known for being the best at cleaning. Where possible, make your property as easy to clean as possible. Consider durable flooring choices, such as wide tiles in the bathroom that are easy to wipe and mop, or dark carpets in the bedrooms that won’t show stains as easily. 

Clearly explain tenant responsibilities 

Student tenants may never have rented before so its important to spend a little more time to clearly explain your expectations of how the property should be maintained as well as tenants’ legal rights and responsibilities. When you check student tenants into your property, do a walkthrough the property with the tenants, show them the inventory highlighting the condition of the property and its contents, and have them sign it to show they have confirmed the condition upon move-in. This should help avoid disputes at the end of the tenancy. 

Use this opportunity to show them how any appliances in the property work to help avoid accidental damages. You could also express your expectations for how you would like the property to be maintained and explain that they need to hand the property back in the same condition allowing for reasonable wear and tear. Offering a couple of tips on how to keep the property clean and ventilated might not go amiss too!

Encourage tenants to report issues 

Sometimes damages occur during a tenancy that could have been easily fixed but worsen as they go unreported. Student tenants might feel nervous to report problems or property damage if they feel that they are responsible. When you check them in, clearly explain that they should report any maintenance issues as soon as possible so you can help them resolve it.

Collect and protect deposits with Concurrent’s mydeposits integration

Our end-to-end property management platform, Concurrent, integrates with mydeposits, meaning you can collect and automatically protect tenants’ deposits as part of the booking process making the whole experience seamless and hassle-free. 

Want to find out more? Book a demo today.