Does landlord or agent keep the holding deposit if a tenant pulls out?

Does landlord or agent keep the holding deposit if a tenant pulls out?

8:43 AM, 4th February 2014, About 9 years ago 56

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Should a holding deposit be retained by the agent or the landlord?

A tenant paid my agent just under two weeks rent as a holding deposit, but a week later had to pull out due to personal circumstances. I told the agent I expected an amount equal to a weeks rent (being the amount lost due to the property being off the market). The agent agreed to pay me a little less than that, and I presumed that they had paid the remainder back to the person who backed out. Does landlord or agent keep the holding deposit if a tenant pulls out?

I was surprised to later discover that the agent retained the full amount, which seems unethical. I can understand them retaining an application fee, but not a holding deposit – after all it’s my property it is holding! I do not know if they charge a letting fee (nothing on the website) and I’ve not seen the terms of the holding deposit – it may say they will retain it in these circumstances. No mention of holding deposit in their terms with me. I would like to challenge this on principle, but I’m loathe to, as I’ve had a good working relationship with them up to now.

Any voices of experience or wisdom?


John Frith

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Mark Alexander - Founder of Property118

8:48 AM, 4th February 2014, About 9 years ago

Hi John

At face value this does seem to be rather unfair to the tenants and possibly even sharp practice on the part of the agent. It doesn't really inspire confidence does it?

Having said that, we only have part of the story. Could it be that the agent used the fees for referencing? What was the basis of the agreement between tenant and agent?

Even though the tenant hasn't complained so far as we know, if I were you I would certainly be asking a few more questions, politely of course as it could well be the agent has acted totally professionally. If that turned out not to be the case then i would be off to another agent in a blink of the eye.

Please let us know what you decide to do and how you get on.

The Gatekeeper

9:19 AM, 4th February 2014, About 9 years ago

John I'd worry more and dig a lot deeper on just exactly how this "holding deposit" was described in writing by your agent as many holding deposits are still likely to be deemed a deposit if challenged. It is a minefield area and one that needs treating with caution.

In terms of what can be retained it depends if the tenant challenges it. If they do then only the reasonable costs incurred because of the application if it ever got that far, such as referencing. But very little else and certainly nothing to you.

If not challenged then all well and good

Mark Alexander - Founder of Property118

10:30 AM, 4th February 2014, About 9 years ago

Reply to the comment left by "The Gatekeeper" at "04/02/2014 - 09:19":

Until a tenancy is created any deposit paid does not fall within the Tenancy Deposit Protection laws.

Some people prefer to call it something else but I have looked into this in great detail and what you call it makes no difference whatsoever. The trigger for Tenancy Deposit Protection law is the creation of a tenancy.

Romain Garcin

10:47 AM, 4th February 2014, About 9 years ago

First of all, you should remind your agent that any deposit he receives is received on your behalf, so he is not in a position to decide what to do with any of it.
If your agent kept everything without telling you that sounds like a secret profit, and you should demand immediate payment (minus any fee he earned).

Regarding what can be withheld when a holding deposit is paid, my understanding is that at law it is not simple: it depends on what was agreed in exchange of the prospective tenant paying it.

Phil Ashford

10:58 AM, 4th February 2014, About 9 years ago

Mark - 'The creation of a Tenancy'. When is that?

A signed AST in advance of a move in date is just a Contract to create a Tenancy, unless it is signed immediately prior to Occupation.

So, are you saying that a Deposit taken in January for a Student house to be moved into in July, does not need to be protected until July? Since the Tenancy would not commence until the tenant assumed responsibility for the Property itself by virtue of accepting keys.

The Gatekeeper

11:14 AM, 4th February 2014, About 9 years ago


You are wrong in saying " A signed AST in advance of a move in date is just a Contract to create a Tenancy ..." it is potentially legally far more than that. And yes of course a deposit taken in January would need to be protected and have PI served within 30 days of touching the money no matter when the actual tenancy was going to start, or be signed or anything.


You are much closer to the correct position here


You are incorrect especially in thinking that a deposit paid does not become a deposit until the tenancy is created. The intention to create a tenancy is enough and that is defined in the 1988 Housing Act. This is why it all needs to be handled so carefully, and why any contrivance to try and get round the TDP requirements whilst holding a chunk of money that on any common sense assessment a reasonable person would say was a deposit, is extremely dangerous.

The whole key lies in intention and whether there is an intention to create a tenancy at some future date, and whether this payment can be regarded as part of that intention. It could also be regarded as part performance of a contract.

You (and possibly Phil but certainly anyone else still using them) need to realise the idea of a Pre Tenancy Contract being just that and any money paid when signing it is not a deposit was of course killed stone dead by the 2004 Act and in fact is now one of the most dangerous bits of paper you can sign - because any payment made alongside or as part of it is a deposit and needs proecting within 30 days of payment.

You must all do as you please and as you think best and on the basis of your reasearch and advice taken. All I would say is proceed with GREAT caution when taking any payment at all, at any time, that is not obviously a fee in respect of something very clear, like referencing. Or in other words could be argued to be a deposit, whether intended to be so or not.

This holding deposit may be just that but the very word "deposit" being used in conjunction with it rather smacks of it being a deposit - don't you think? As someone else once said if it looks like a duck and quacks like a duck it probably is a duck. Exactly the same applies to deposits and acting objectively as a reasonable person in judging whether something is a deposit is a very good starting point.

Mark Alexander - Founder of Property118

11:21 AM, 4th February 2014, About 9 years ago

Reply to the comment left by "Phil Ashford" at "04/02/2014 - 10:58":

Hi Phil

That is indeed the conclusion which was arrived at.

Romain Garcin

11:29 AM, 4th February 2014, About 9 years ago

When a holding deposit is paid, there has usually been no agreement at all to create a tenancy. Usually it is paid to cover referencing fees and in exchange of the landlord agreeing to deal exclusively with the prospective tenant.
In such case, in my view it cannot be construed as a tenancy deposit as it is certainly not a "security for the performance of any obligation of the tenant".

Now, once a tenancy has been agreed with a tenancy deposit, and e.g. an agreement has been made to use any amount of the holding deposit towards that tenancy deposit, it would be very wise to protect in a scheme within 30 days of that agreement (not from start of tenancy).
Perhaps lawyers have a clear cut view on this, but I suspect the wording of HA 2004 is not crystal clear... Better be safe than sorry.

Mark Alexander - Founder of Property118

11:35 AM, 4th February 2014, About 9 years ago

I have just re-read Phil's comment.

I would never advocate signing an AST until move in day. Things can go wrong (e.g. not having obtained vacant possession).

I have invited Mary Latham to comment on this thread. This is because Mary has 40 years experience in the student lettings market whereas I have none and have never actually requested a holding deposit. Mary has also been a landlords accreditation trainer for several years and also contributed to a previous thread regarding this subject some time ago. Sadly I cannot locate that thread, otherwise I would link to it.

11:41 AM, 4th February 2014, About 9 years ago

I just searched Google for "Property118 Holding Deposit"

Could the threads linked below be the ones you are looking for?

Come on bro, wake up, you taught me this stuff! LOL

When to sign the AST and taking holding deposits -

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

1 2 3 4 5 6

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