Student lettings

With the start of the new academic year Andrew Arden QC and Justin Bates consider some of the fees and other sums of money that students may have to pay to rent accommodation.

 

Introduction

In September and October, around 158,000 new students are estimated to start university (figures taken from UCAS). Whilst most new students are offered accommodation in halls of residence or other property owned or sourced by their university for the first year, they will soon find themselves having to make decisions about their accommodation for the following years.

 

For many students, this means finding others with whom they want to live and then finding a property. It is likely to be their first experience of renting for all the members of a group. Their parents may well not have any relevant or recent experience of the rental market. It is all too easy for them to be taken advantage of by landlords or agents. As the examples below show, this is an area that is ripe for legislative intervention.

 

Fees

There is a range of fees that tenants may find themselves being asked to pay. A recent survey carried out by Shelter found that one in four people renting in the private sector in England felt that they had been ‘ripped off’ by letting agents charging fees for, among other things,

  • Criminal Record Bureau checks
  • credit checks
  • unparticularised administration charges
  • inventory fees
  • unnecessary document copying
  • new tenant fees
  • renewal fees

 

Such fees are unlawful in Scotland (see the Rent (Scotland) Act 1984) and the Scottish Government has committed itself to ensuring that the law is enforced and (if necessary) amended to close up any loop-holes (see here). Shelter Scotland have recently launched a campaign to encourage tenants to sue for the return of any fees that were paid: as at June 2012, there were some 870 claims in the Scottish courts (all awaiting a decision) worth over £100,000 (see BBC news report, here).

 

There is no analogous protection in England. The Accommodation Agencies Act 1953 provides limited protection against fees for the provision of information about rental properties but does not prevent the fees of the sort that Shelter has identified.

 

It may be that the Unfair Terms in Consumer Contracts Regulations 1999 or the Consumer Protection from Unfair Trading Regulations 2008 could be used to fashion a remedy, but it would be vastly preferable to regulate fees at the outset, rather than leave it to tenants to try and reclaim them at a later date.

 

Holding deposits

Holding deposits also give rise to concern. Would-be tenants are asked, fairly early on in the letting process, to pay a ‘holding deposit’, usually in the several hundreds of pounds. The purpose is to prevent would-be tenants agreeing (or ‘bidding’) to take properties, which may cause them to be taken off the market or an alternative bid to be rejected, but then withdrawing because they find something better. That purpose is plainly unexceptionable, but holding deposits may be taken from several would-be tenants in relation to the same property – which is plainly wrong unless they are aware that they are in a ‘queue’ – and the vice lies in the difficulty unsuccessful tenants have getting their deposits back because

  • the circumstances in which the would-be tenant is entitled to withdraw are usually not spelled out,
  • the conditions for return of the deposit are likewise not spelled out (eg, if the credit check is said to be negative),
  • agents are hard to reach once they know the student will not be renting from them,
  • the terms of the tenancy may prove so onerous that the tenants cannot take it up, eg guarantees (see below), and
  • students do not know how to challenge a refusal to return the deposit and do not have access to advice or assistance getting it back. Indeed, it is not unknown for a request for return of the deposit to be met with the threat of an additional claim for a greater amount on specious grounds that the tenants’ putative default has cost the landlord or the agent more than is covered by the deposit. Furthermore, in practice, the amounts each individual student has to pay – perhaps only one or two hundred pounds, while a lot of money, is low enough for them to realise that litigation is not a viable option.
  • Alternatively, some agents assert that the deposit is transferable to another property (which ‘ties’ the would-be tenant to that agency, even if there is an alternative available elsewhere).

 

Guarantees

This has become so widespread that it merits a section of its own. This is the common practice of requiring all the parents of the would-be tenants planning to share a property to sign personal guarantees both for the whole rent of the property (not just the share of the rent which their child will be paying) and all other liabilities under the lease (ie, as one of the joint tenants with joint liability for all the terms), eg damage. This is made a condition of the tenancy being granted and, if the tenants do not take it up because their parents refuse to sign the guarantee, the deposit is then withheld.

 

There is quite a lot that can be said about this – not least because one of us has recently been through it (work it out – one of us isn’t old enough to have a child living away from home)!  First, the credit check will normally relate only to a single share of the rent – not many but most parents would fail a credit check for the whole rent for a whole house or large flat; when asked to guarantee their own child’s liabilities, they are nonetheless guaranteeing the rent in full. Secondly, the idea of guaranteeing the ‘behavioural’ terms for a group of young people, some of whom may not even be known to the parents, is hugely onerous. Consider this: their child comes home for the holidays while one of the other sharers stays on and, perhaps – even probably if a long enough break – has others in for a while, which ‘visitors’ or ‘lodgers’ cause damage or who, say, smoke in the property (which these days is commonly prohibited), for which those parents – never met joint tenant, never met sharer – will nonetheless be liable in law. Finally, the parents are in a real bind: given that these guarantees are so very common now, almost universal in relation to student lettings, how will their child find accommodation unless they sign?

 

Sometimes, it is possible to negotiate a variation to confine liability to the rent payments of one’s own child (just as it is sometimes possible to get back a holding deposit or even several) – and, yes, ‘guess who’ managed to do both but possibly (just possibly) was better equipped than most to be able to do so!

 

Otherwise, however, such guarantees are highly suspect and could well be regarded as unfair under the 1999 Regulations (above) – if otherwise qualifying (eg standard terms, etc) or even a sham (if the credit check was limited to the individual rent share). Again, though, this is not something which ought to be left to individuals to have to fight and cries out for legislative intervention.

 

Conclusion

We doubt we shall see legislation – in the current Parliament at any rate. The coalition government is committed to supporting and stimulating the private rented sector and any move such as this would be likely to meet a fairly solid block of opposition from agents and landlords which it will not want to have to deal with. Sometimes, though, it is right to fight on – and on and on – both because it may have some protective value insofar as it informs people who may then be willing to push back a little harder and because eventually it may lead to change.

 

With a bit of luck, it might even be in time for the other of us!

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5 Comments

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5 responses to “Student lettings

  1. The outrageous behaviour of students’ landlords does not often come to the attention of the bar or indeed most legal aid practitioners. this is because often the value of claims does not exceed the small track limit.

    We act for the University of London’s Housing Services (ULHS) who do a fantastic job advising London students, not just from the London University federation but also the University of the Arts and other institutions. Shelter is also aware of the way that students are ripped off. It is quite common to find properties being rented that the landlord does not have the right to let and students facing eviction at very short notice.

    As far as parental guarantees are concerned, in a landlord’s market it is often impossible to persuade a landlord to accept less than an uncapped guarantee which as Andrew and Justin point out, makes parents liable for the shortcomings of the whole student household.

    The plight of oversees students is even worse, where landlords often insist of six or even twelve months rent in advance in lieu of a guarantee. We are advising two groups of students at present where more than ten thousand pounds has been paid to an agent for holding deposits or rent in advance. In both cases the agent has withdrawn the offer of accommodation but has failed to refund the money.

    Obtaining judgements is quite straightforward but enforcing them is entirely another matter.

    My clients, ULHS would like to be involved if anything gets going in terms of legislative changes which might help students: 020 7862 8880 or email housing@lon.ac.uk

    • ardenchambers

      Deirdre,

      Andrew and I have tried to get the Westminster parties interested (even going so far as to write amendments for free!) but without success. It may be that the Welsh Government is more receptive. We’ve sent them information about these problems as part of their recent review into the PRS in Wales.

      I’ll let you know if we hear anything
      JB

  2. Sam

    I’ve always found the whole concept of a “holding deposit” outrageous. A deposit can’t bind a landlord to grant a tenancy and so the deposit isn’t holding anything. A landlord could easily back out at any time and suffer no consequence.

    If the prospective tenant backs out, however, they potentially lose the deposit. Most agents won’t deal with you unless you pay though.

    • ardenchambers

      So, what we want is someone to back out, not get it refunded, and then sue for it. I’m sure there are enough lawyers who’d be prepared to do something like that pro bono. It’s just finding someone who wants to do that (i.e. considers it worth it in terms of energy, effort, etc).

  3. Pingback: Fraud and the private rented sector | LAG housing law

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