When to sign the AST and taking holding deposits

Interesting question Mike. I can't think that I've ever had a situation where I've had tenants pass referencing and not agree to a move in date within 30 days so I've never really given this much thought or taken professional advice on the matter.

My understanding is that a holding deposit doesn't actually have to be protected at all.

If you were to charge it a daily holding fee, charged in advance but refundable in full subject to the tenant signing an AST with you on an agreed date or in the event of you not signing the AST on the same agreed date I wonder whether that might work?

My thinking is that you could then protect the deposit on the morning of move in day. If your vacating tenant fails to move out you would have to refund the holding fee and if the new tenant changes his mind about the property you keep the fee. Obviously this wouldn't work in Scotland as it's illegal to charge fees to tenants there.

It is an absolute nightmare if an outgoing tenant doesn't move out on the agreed date or an incoming tenant changes his/her mind on move in day. I've had both happen to me in the past and it is incredibly frustrating, particularly in cases when an outgoing tenant stays put as this hurts both you and the incoming tenant. Fortunately it doesn't happen very often.

As I said at the beginning of this post, I've never taken professional advice on this so the ideas above are just off the cuff ideas.

I too am interested to read strategies from others in terms of how they deal with these situations.

Reply to the comment left by "Mark Alexander" at "07/09/2013 - 12:55":

The money that we take to hold the property pending doing our referencing etc. MUST be called a RETAINER. It is NOT A DEPOSIT and therefore is not covered by Deposit Protection legislation. A receipt for a retainer should be dated and the tenant should sign the landlords copy and the landlords the tenants copy. This way we have our paper trail and no confusion about the purpose of this money. Some landlords go so far as to call it a non-refundable retainer to prevent a tenant backing out between agreeing to take the property and signing the AST, but the landlord would have to return this money if he decided not to take the tenant because of poor references etc.

When we are letting to students it is common practice to take a retainer in December for a tenancy that will not begin until the following July. This money can be held and not protected up to the date that the AST is signed at that point it is no longer a retainer because the contract has been agreed and this money is now part of the first rent payment, part of the deposit or an Admin fee. It should be made clear on the receipt exactly how these funds will be used once the AST is signed, failure to make it clear could start the deposit protection clock ticking when it doesn't need to.

Remember if the AST is not witnessed the tenants can back out at any time up until the day that they move in and the landlord would need to repay the money held.

To sum up Double receipt the money taken as retainer. Make it clear on the receipt what it will become after the AST is signed. Get the signatures on the AST witnessed

NEVER USE THE WORD DEPOSIT UNTIL YOU HAVE TO!!!

On the issue of tenants not moving out. So long as we have done everything legally possible to gain vacant possession for our new tenants we would not be in Breach of Contract though we would probably have to find them temporary accommodation. This is why I serve Section 21 a 3 months before the end of the fixed term - this is all I can do legally to gain vacant possession in the shortest possible time - this is what I tell my tenants when I serve the Notice and we don't fall out .

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Retainer / Deposit?

I do not share Marys confidence in the use of different words being sufficient to save her bacon should a section 214 claim ever be made against her for a 'retainer'.

The word 'retainer' has only 2 uses in legal language - a fee to a barrister or (in some legal dictionaries) in the management of a deceased's estate.

Section 212(8) tells us what should be treated as a deposit in this case, and to paraphrase it is any money held for the performance of obligations / liabilities in connection with a tenancy.

Hi,

I have a question regarding Prescribed Information - Non Compliance of Tenancy Deposit proof, within 30 days.
I need to know, which court do I have to apply for this case ? IS this the Small Claims Court ?

Regards
Johnny

Reply to the comment left by "Johnny English" at "08/09/2013 - 20:40":

You apply to the county court. "Small claims" is a process used there, but this type of claim should be put on "multi track", not "small claims".

See here and pay particular attention to the last couple of paragraphs. http://tenancyanswers.ucoz.com/index/claiming_for_deposit_non_protection/0-60

Thanks Dave. I have send a Letter of Action to my Letting Agent assuming that it is Small Claims court, which I believe should be reaching them tomorrow.
I thought this was a simple case , and now its actually got complex that I thought. I hope after seeing the Letter of Action, they dont take me to court 🙁

Will this cause more problems to me, will agent bite me back.

I am just getting a bit scared now ? Can you please advice whether this is going to cause me more problems ?

About me : I have been a tenant within no issues at all, no rent arrears, no unpaid utilities, no problems , no damages, they have sent me a End of Tenancy charges, which I plan to contest through the TDS scheme.

Reply to the comment left by "Mary Latham" at "08/09/2013 - 16:10":

I don't think it matters whether the landlord has done everything he could to get possession when determining if contract has been breached: he failed to deliver on his contract to the new tenant and he is therefore in breach.

Reply to the comment left by "Dave Reaney" at "08/09/2013 - 19:37":

Tenancy deposit protection legislation was put in place to give tenants redress if a landlord withheld monies from their deposit to cover unreasonable costs. Until there is a tenancy there can be no tenancy deposit. Monies taken before a tenancy agreement is signed is therefore for a different purpose, it is taken to" hold" or "retain" the property pending completion of the paperwork. Once the contract is signed it can no longer be a retainer or holding fee but up to that point that is exactly what it is.

As you quoted "Section 212(8) tells us what should be treated as a deposit in this case, and to paraphrase it is any money held for the performance of obligations / liabilities in connection with a tenancy" That is very clear until there i a tenancy there are no obligations/.liabilities to cover.

This is not an attempt to avoid tenancy deposit protection legislation it is to give the landlord/letting agent time to get the references, credit checks, guarantees in place before the contract is signed. This can take much longer than 30 days where there are several parties to an AST, as in the case of students where their guarantors are all over the country and in a typical joint AST there are an average of 5 sets of checks to put in place. If during the process one or more of the group drops out, this happens commonly, the process has to begin again after replacement tenant found to joint the group. I have know this process take up to 2 months.

To register a deposit for protection the landlord needs all the information on the tenants and in some cases, the third parties that have provided the deposit, he also needs the start and end date of the tenancy and this information may not be available until the tenancy agreement is signed.

So long as the purpose of the money is identified before and after the contract is signed,( when it can no longer be a retainer/holding fee), the landlord has not broken the law.

In fact most landlords I know are now taking nonrefundable Admin fees and therefore this is academic because they then don't need a retainer and in many cases are not taking deposits either. I am told that, given the choice, tenants prefer to pay £150-250 admin fees rather than several hundreds of pounds in deposits. It is not something I have done myself but if I find that tenants do prefer this I may do it in future so long as there is not legislation to prevent it.

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There is a difference between a holding deposit and a tenancy deposit in any case. Deposit protection regulations only apply to (assured shorthold) tenancy deposits.
The use of the word 'deposit' is not crucial, the purpose is.

Reply to the comment left by "Romain " at "09/09/2013 - 10:39":

I agree but not using the word deposit makes it much clearer for everyone in my opinion.

When I think of our concerns when the HA 2004 was being drafted not in a million years did we every consider that deposit protection would become such a major issue.

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