Is agent being “smart” with reservation fee?

by Readers Question

10:32 AM, 21st January 2020
About a month ago

Is agent being “smart” with reservation fee?

Make Text Bigger
Is agent being “smart” with reservation fee?

After tenant fee ban, when a letting agent charges potential tenants one week rent before putting offers to me, WHO does this reservation fee belong to, me the landlord or my letting agent, in case the offer defaults on tenant side?

What I find is:
1. after an offer didn’t reach a new AST e.g. tenant changes their minds, I don’t normally hear anything from my letting agent about the reservation fee.
2. A few things led me to suspect, my letting agent may use this fee to keep and attract potential tenant on ALL their market property, rather than my property only, i.e. they can move people who first made offer on my property onto their other market property if the tenant changed mind on renting my property later on

Am I right to ask for reservation fee back from my letting agent if the tenant default on their offer to me?

Mike

Editors Notes:

Tenant Fees Ban Government guidance >> click here

Landlords will usually have two weeks (14 days) to enter into a tenancy agreement with a tenant once a holding deposit has been received by the landlord or agent. This is before the ‘deadline for agreement’, which is the 15th day after the holding deposit has been received. However, you may agree a different ‘deadline for agreement’ with the tenant in writing (which could be more or less than 14 days).

You should provide a tenant with clear information that sets out:
• the amount of deposit they have paid
• the agreed rent for the property
• the specified date for reaching an agreement (‘the deadline for agreement’)
• other material agreed terms you will be letting the property on

You will be able to use this as evidence should a tenant challenge your decision to
retain a holding deposit. You must refund a tenant’s holding deposit in full within 7 days of:
• entering into a tenancy agreement with the tenant
• you choosing to withdraw from the proposed agreement; or
• the ‘deadline for agreement’ passing without a tenancy having been entered

A holding deposit can only be retained where a tenant:
• provides false or misleading information which you can reasonably consider when deciding to let a property – this can include a tenant’s behaviour in providing false or misleading information
• fails a Right to Rent check
• withdraws from a property (unless a landlord or agent imposed a requirement that breached the ban or acted in such a way to the tenant or relevant person that it would be unreasonable to expect a tenant to enter into a tenancy agreement with them)
• fails to take all reasonable steps to enter into a tenancy agreement and the landlord or agent takes all reasonable steps to do so (unless a landlord or agent imposes a requirement that breaches the ban or acts in such a way to the tenant or relevant person that it would be unreasonable to expect a tenant to enter into a tenancy agreement with them).

You must return the holding deposit if you impose a requirement that breaches the ban or act in such a way towards a tenant or a relevant person that it would be unreasonable to expect them to enter into a tenancy agreement with you (e.g. a landlord or agent asking a tenant to a pay a fee for referencing, seeking to include an unfair term in the tenancy agreement or acting in an aggressive or harassing way).

You must set out in writing why you are retaining a tenant’s (or a relevant person’s) holding deposit within 7 days of deciding not to let to them if this is before the ‘deadline for agreement’ or within 7 days of the ‘deadline for agreement’ passing, otherwise you forfeit the right to retain their holding deposit and must return it to them.

Even where you are entitled to retain a tenant’s holding deposit, you should consider whether it is necessary to do so. We encourage landlords and agents to decide on a case-by-case basis whether to retain part of the deposit and understand that they may only need to cover specific costs which have been incurred (for example, referencing checks). You should be able to provide evidence of your costs to demonstrate that they are reasonable.

A tenant will be able to recover their holding deposit via the local authority (usually Trading Standards) or First-tier Tribunal where:
• you do not have legitimate grounds to retain their holding deposit
• you retain their holding deposit but do not provide the tenant with notice setting out why you are retaining the deposit (within 7 days of deciding not to let to them or within 7 days of the ‘deadline for agreement’ passing)

Unlawfully retaining a holding deposit is a civil offence with a penalty of up to £5,000.



Comments

Neil Patterson

10:46 AM, 21st January 2020
About a month ago

Hi Mike,

Please see my editors notes above as I am hoping it is highly likely the deposits are being returned.

Eugene Tooms

11:37 AM, 21st January 2020
About a month ago

I wish I could fine agents for everytime they fail to show up or waste my time with a property that is far from my spec.

Michael Barnes

22:46 PM, 29th January 2020
About 3 weeks ago

If tenant chooses not to continue, then the money belongs to the landlord as compensation for taking the property off the market.


Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

Advance Payments - Kicking the can down the street

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More

Buy now good quality fake watches.