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 10 years ago 56

Text Size

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?

Thanks

John Frith


Share This Article


Comments

Mark Alexander - Founder of Property118

8:33 AM, 9th February 2014, About 10 years ago

Reply to the comment left by "Gary Nock" at "08/02/2014 - 20:34":

Hi Gary

I still support that view in this thread, however, as Industry Observer points out, it is just my opinion. The fact that my opinion is the same as the one on the CLG website apparently has no relevance and only a Court of law can decide. On that point the opinions of Industry Observer must be noted and a commercial view must be taken.
.

Romain Garcin

11:28 AM, 9th February 2014, About 10 years ago

One needs to look at the definition of a tenancy deposit (quoted by John previously).

As said, a holding deposit is not usually related to any obligation under any AST for the simple reason that no AST has usually been agreed when the holding deposit is paid: if it is a security it is therefore certainly not a security for obligations under an AST!

If holding deposits were tenancy deposits they would require protection no matter what, even if fully refundable (a tenancy deposit is also fully refundable after all).

John Frith

21:16 PM, 9th February 2014, About 10 years ago

Reply to the comment left by "Romain " at "09/02/2014 - 11:28":

Hi Romain. You and Mark may be right, but I am not so sure as you that the AST has not been "agreed". I'm pretty sure that a verbal agreement is still binding , so the fact that nothing has been signed isn't relevant . I also favour the view that even if references haven't been completed that the "intention" is still there, and even though the agreement has only been "part executed" - the TDS legislation applies even at that stage.

I also suspect that the people who dreamt up the legislation would have intended it to apply to holding deposits, despite the inconvenience to us landlords.

As an update, I saw the agents terms of the holding deposit, and it clearly states that all monies are held on behalf of the landlord, so I have written to them suggesting:

1) that by saying the 30 days start when the security deposit is fully received they are misleading landlords into a situation where they could be sued, and
2) that as the holding deposit was in my name, it is my decision what happens with it, and I say that legally and morally, the tenant should get back what the agency has currently withheld.

I'm not sure my relationship with the agent will survive this!

Mark Alexander - Founder of Property118

23:01 PM, 9th February 2014, About 10 years ago

Reply to the comment left by "John Frith" at "09/02/2014 - 21:16":

Mary Latham should know what the intention was, she was party to the meetings and the drafting on the legistlation!
.

Mary Latham

12:43 PM, 23rd February 2014, About 10 years ago

John I am curious to know how this turned out?

------------------------

Follow me on Twitter@landlordtweets

The perfect present for property investors @ £4.64. My book, where I warn about the storm clouds that are gathering for landlords is available on Amazon title. Property For Rent – Investing in the UK: Will You Survive the Mayhem? http://www.amazon.co.uk/dp/1484855337

John Frith

10:05 AM, 24th February 2014, About 10 years ago

Hi Mary,

Yes, I've just about come to the end of this incident.

I saw the holding deposit terms and it was (to me) a real mismash, but the most relevant point was that it said clearly, and several times, that any money received by the agent was being held on my behalf. The money could go against the deposit, the letting fee, or an agency fee (whatever that is).

I wrote saying that:
1) By NOT notifying landlords that the 30 days began when the holding deposit was received, they were exposing landlords to the possibility of being sued.
2) The terms stated that they could retain the holding deposit if the tenant backed out. I linked to the OFT document about unfair terms and conditions, and pointed out that they should return the surplus funds (£148) to the tenant.

On the 1st point, they contacted their own solicitors, who just wrote to them saying that a holding deposit was NOT subject to TDS, and the agents accepted their word, despite me citing the letter of the law that said otherwise. They did agree to indemnify me against being sued by tenants. Not sure how that will work out.

On the second point, they claimed the £148 for their costs (letting fee and agency fee), which I couldn't argue with. I did point out that it was unnecessarily confusing to lump their fees (which is a matter between them and the tenant) in with money for the deposit against the property, especially as it was all identified in the T&C's as money being held on behalf of the landlord.

I'm not holding my breath that they will do anything about it. I suspect they just see me as being akward.

Mark Alexander - Founder of Property118

11:47 AM, 24th February 2014, About 10 years ago

Reply to the comment left by "John Frith" at "24/02/2014 - 10:05":

Time to change agents John?
.

John Frith

12:39 PM, 24th February 2014, About 10 years ago

I'm going to stay. They have been good otherwise, and I'm not sure another agent would have a better understanding. Better the devil you know, and all that.

Theodore Brown Property Management

14:58 PM, 27th February 2014, About 10 years ago

Reply to the comment left by "John Frith" at "24/02/2014 - 12:39":

Hi John.

Thanks for updating us about this incident.

We disagree with the way your agency acted and have never done nor will ever do it ourselves - despite the fact that the practice does seem to be common, per this news item today:

BBC finds 500 cases of lettings agents refusing to return unused 'holding deposits' & fees [VIDEO 2:32]
http://www.bbc.co.uk/news/business-26365397

John Frith

15:37 PM, 27th February 2014, About 10 years ago

Reply to the comment left by "Theodore Brown Property Management" at "27/02/2014 - 14:58":

Just to clarify, the article you link to is about agents cancelling the agreement, but failing to return the holding deposit. With my case, the would-be-tenant pulled out for personal reasons.

I think my agent is misguided, but I don't think they are deliberately deceptive.

Leave Comments

In order to post comments you will need to Sign In or Sign Up for a FREE Membership

or

Don't have an account? Sign Up

Landlord Tax Planning Book Now