When to sign the AST and taking holding deposits

When to sign the AST and taking holding deposits

12:42 PM, 7th September 2013, About 11 years ago 19

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I have read that on no account should a landlord sign a new tenancy, unless he has vacant possession of the property.Even if good tenants have given notice in writing, it doesn’t mean they will actually move out on the day they say they will. On that basis it makes sense that new tenants should sign the new tenancy on the day of moving in. When to sign the AST and taking holding deposits

I have had problems in the past however, when tenants go through all the motions of wanting to take a property and then pull out, leaving us with lost rent and lost potential tenants.

What do others do to protect themselves ?

In Mark’s excellent Tenant Referencing Using Common sense’ he says …..”Once referencing is accepted …..we ask for the deposit to be paid to hold the property, we immediately protect the deposit….”

What is best practice if taking a so called holding deposit ?

When is a deposit just a holding deposit and not a tenancy deposit and should this ever/always be protected?

Can a deposit really be protected before a tenancy has been created (the DPS ask you to fill in the tenancy start date) ?

If the deposit was taken more than 30 days before the start of the tenancy wouldn’t it need to be protected and the Prescribed info served before moving in?

I look forward to reading your thoughts.

Many thanks

Mike


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Comments

Seething Landlord

1:06 AM, 10th September 2013, About 11 years ago

We use the following wording:

Receipt for application/reservation fee in respect of the proposed tenancy of

(enter address)

Received from (the applicant)

The sum of

in cash / by cheque

The fee is paid and accepted on the following terms:

The Landlord will not offer the tenancy to any other applicant until the result of this application has been determined

If the application is not acceptable to the landlord for whatever reason, the fee will be returned in full to the applicant and a tenancy will not be granted

If a tenancy is offered the fee will be returned to the applicant on commencement of the tenancy

If the applicant withdraws his/her application, or if a guarantor has been requested and the guarantor withdraws, the fee will be used to offset the Landlord’s reasonable costs and expenses incurred until the property is let

For the avoidance of doubt, it is agreed that this fee is not a “tenancy deposit” within the meaning of the Housing Act 2004

Signed (landlord)

Signed (applicant)

Date

Romain Garcin

8:20 AM, 10th September 2013, About 11 years ago

Reply to the comment left by "Seething Landlord" at "10/09/2013 - 01:06":

Well then, you take a holding deposit that you call a fee... 😉
There's nothing confusing about calling a holding deposit by its name, especially that it is the commonly used name in the industry.

Mike Tighe

9:55 AM, 12th September 2013, About 11 years ago

I posted this original question, and would like to thank all of you who have responded.
I now feel much better informed about this issue.

Mark Alexander - Founder of Property118

10:34 AM, 12th September 2013, About 11 years ago

Reply to the comment left by "Mike Tighe" at "12/09/2013 - 09:55":

You are very welcome Mike. The strategies used by my family are covered in far greater detail on my brothers website and this particular issue is addressed very neatly in the National-Lettings guide to finding perfect tenants which is well worth a read. Please see >>> http://lettingagentsonline.co.uk/free-guide-to-finding-perfect-tenants/

Remember, it is not too late to set up a regular donation to support the running of this forum - please see >>> http://www.property118.com/donations/
.

lauren field

13:20 PM, 12th September 2013, About 11 years ago

Ok, forgive me but skimmed through this quickly and forgive my typing as I'm not in the office but this is an important topic for everyone to understand & get right

basically, Mary is correct in regards to the difference between deposit and holding depost etc and that it is okay to take a holding deposit, not have it protected and be able to keep it in the event the tenant pulls out or fails the referencing* (*although, strict guidelines apply)

HOWEVER, please please as landlords renting out your properties DO NOT use conflicting. misleading or ambiguous wording..

The use of the word 'retainer' is NOT advisable. Whilst I understand the logic of why Mary uses this it is NOT something I would advise. The tenant is not 'retaining the property' in the true sense of the word 'retain'. The use of the 'retain' implies keep and definate. By paying a retainer a tenant may argue that as far as they were concerned the tenancy was his/hers regardless of references as he has paid a retainer not a holding deposit. Effectively, he has secured his right to a tenancy as opposed to an implied right by the use of the word retainer.

ALWAYS, keep things simple.& make sure your tenants UNDERSTAND exactly what they signing and paying for. ALWAYS use simple english in any documentation incoluding tenancy agreements. IF and I stress IF you ever find yourselves having to go to court it is likely the Judge will take the tenants view point as the tenant is considered ALWAYS to be the most vulnerable. Sorry guys that is just how it is.

As a Landlord YOU must always undertake due diligence and ensure you have worded everything correctly. YOU are viewed as having the resources to be able to consult with professional legal representatives to ensure YOU have done things correctly. I spend my life reviewing contracts, assisting both tenants and landlords in problem cases and in the majority of cases we review, the landlord has always worded something wrong or a term in the tenancy agreement has not been correctly used, even if the landlord is in the right the tenant will win based on a landlord naively using bad terminology. Fortunately, most tenants are just as naive but more and more 'no win, no fee' solicitors and claims management firms are starting up and focusing on consumer issues. Housing is major consumer issue & whilst banks are the easy target it doesn't take a genius to work out that tenancy deposits etc are in their sights. In fact, their is already one company claiming that 85% of all prescribed information has not been issued correctly and they guarantee, yes guarantee that tenanst making a successful claim using them, will receive compensation of 1 and 1/2 time the depositt , I would therefore strongly advise ALL landlords that there has never been a more important time to make sure they have the 't's' crossed ....you get my drift.

Anyway, the use of the words HOLDING DEPOSIT is more than adequate and I am more than happy to email one that WILL hold up in court if there was ever a problem, should any of you want me to

Seething Landlord - STOP using the words application/reservation fee and take out all use of the word fee immediatley ! The Judge would crucify you !!! That is a clear case of misleading a tenant. Whilst you have a good understanding of what a receipt should include YOU should never use the word FEE. A holding deposit is not to be confused with a fee. They mean 2 different things & as a landlord or as an agency you cannot legally charge an application fee. You can charge for a referencing fee but NOT an application fee (even if, when you say application fee you really mean holding deposit). Using the word fee is really not good practice.

Sorry guys, whilst you are all on the right lines, it's these little things you really do need to get right in the off chance you have a savvy tenant or go to court for something else and you get stung for something you least expected

If I was representing a tenant, I would easily have the Judge understand that the tenant was misled into handing over his money on the basis of retainer and application fee! Beware that this can also become a criminal matter if you're not careful as by usiing the words 'application fee' as opposed to 'holding depost'

Many of you will think this is just being a tad too pedantic but I've been doing this for far to long & seen many naive & unsuspecting landlord suffer needlessly over stupid costly mistakes to advise you otherwise

Think of your tenants as children when it comes to wording and don't get obsessed with usiing legal jargon - trust me it WILL go against you if things get difficult. Don't assume because you understand what you mean, they will and even if they do, if you've used wrong terminology thats deemed misleading they will use it against you. That's human nature. So make sure you get things right from the start.

Renting has been on the increase for some time now and with many consumer forums and easy access to the internet, tenants are getting wiser and more confident to challenge their landlords, especially if they think they can get compensation. So don't get caught out by being complacent.

Mark Alexander - Founder of Property118

13:38 PM, 12th September 2013, About 11 years ago

Reply to the comment left by "lauren field" at "12/09/2013 - 13:20":

Lauren, you said

"Anyway, the use of the words HOLDING DEPOSIT is more than adequate and I am more than happy to email one that WILL hold up in court if there was ever a problem, should any of you want me to"

YES PLEASE!

My email address is mark@property118.com

I doubt many others will be happy to post their email address on a public forum. Once you have emailed mine I would welcome a discussion offline.
.

lauren field

14:13 PM, 12th September 2013, About 11 years ago

As soon as I get back to the office will do Mark and of course - apologies again for not yet taking the time to read all the in 's and out's of your forum - I haven't even managed to change my password yet lol !

Seething Landlord

19:09 PM, 12th September 2013, About 11 years ago

Reply to the comment left by "lauren field" at "12/09/2013 - 13:20":

Thanks for your guidance. I have no wish to be crucified by a judge or anyone else, so will act on your advice and change "fee" to "holding deposit", although I have to say that prospective tenants have had no difficulty in understanding the existing wording (I know that's not really the point). Having done that, is the wording OK in your view?

20:21 PM, 12th September 2013, About 11 years ago

Reply to the comment left by "lauren field" at "12/09/2013 - 13:20":

An in depth response - thanks Lauren.

Can you clarify for me why a 'referencing fee' is acceptable and an 'application fee' isn't? Letting agents have to cover the cost of staff and property viewings somehow.

I do understand fees to tenants are forbidden north of the border.

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