What happened when we stopped taking deposits from Students in our Accommodation (PBSA)

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Reduced barriers to entry - Removing the deposit requirement opened us up to more student renters that wanted to secure accommodation with us right away but did not have the funds to go ahead. Forking out deposit funds, can be difficult for students with a limited amount of cash available once their maintenance loan has paid their current rent and other living expenses.

We have found that it's a big pull for students thinking about renting and it's useful we use in our marketing

Less administration - Dealing with a large number of tenants and administering deposits before and after the tenancy period was a cumbersome task. The mere volume to process all around the same time of year inevitably led to delays for deposit refunds which resulted in some disgruntled students despite us specifying timeframes of up to 2-4 weeks for the refund to be processed.

Without dealing with deposits, the check out process of tenants has been a lot smoother and a significant amount of time is saved administratively. Students also aren't waiting on any money from us at the end of the tenancy and we're able to move on to the next set of priorities quickly as a business.

Deposit amount too low - The deposit amounts that have become standard in the industry range from £100 - £600 however the average is usually £250.

On occasions where there's significant damage and/or cleaning left by an outgoing tenant, the amount far exceeds £250, rendering the original deposit amount unsubstantial. At the end of the tenancy, if the tenant is owing rent, £250 is considerably less than an average month's rent AND the tenant would also need to confirm with the relevant deposit scheme that they agreed for any rent to be deducted from the deposit which makes it difficult for recovery and yet more administration work.

Deposit amount too high - The main reasons for charges at the end of a tenancy and therefore deposit deductions were usually for the poor cleaning state and/ or minor damage caused to the accommodation by the student. Under these circumstances, the cost was often well below £50, a cost we could afford bear if unable to recover from tenant. In particular, once general wear and tear is taken into account we need to go in and rectify other items at our cost.

We overcame the cleaning issue by creating a comprehensive cleaning checklist that we adhere to and provide that same checklist to the students which we hold them to at the end of their tenancy. The vast majority respect this and leave our accommodation in great condition. Nevertheless, we always get a cleaner to go over the properties again before the new influx of tenants.  

Where there's a lot of cleaning required, we recover the cost from the tenant or their guarantor, if the tenant does not return to clean promptly. Costs for cleaning and any other potential costs that may arise during the tenancy are detailed in the tenancy agreement and guarantor agreement and we specify that invoices will be issued and expect payment within 7 days.

In-house Maintenance team - the most expensive aspect in maintenance repairs is almost always the labour cost but as we employ our own maintenance team, the cost of labour involved in maintenance is already covered, reducing our exposure to the costs of materials only. We of course still seek to recover the cost of materials and associated labour from the tenant and/ or their guarantor if they're deemed liable.

Furthermore and what's noteworthy is that we have seen no noticeable difference in the condition of our accommodation on check out prior to our decision to remove our deposit requirements.

Guarantors back up tenancies - Every tenant that we let to requires a guarantor that meets our strict requirements, regardless of whether the tenant pays monthly, termly or for the year in advance. This gives us the protection we need and an avenue for recourse if the tenant defaults or causes excessive damage to the property.

If the maintenance is covered and there's a guarantor in place as well as a detailed inventory of condition that's adhered to, what is the need for a deposit when the upside, from what we've found, of appealing to a larger student base is much more lucrative than deposit recovery?

Any questions about PBSA or Build to Rent Apartment Block schemes? Comment below and I'll answer as best I can or even write an article on it.