Holding Deposit Dispute with Letting Agent

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    Holding Deposit Dispute with Letting Agent


    I have a question regarding a potential dispute with a letting agent. As a landlord I hired an independent letting agent to find tenants for me for my family let 3 bedroom BTL house for a fixed fee. I gave him 4 weeks exclusivity, he advertised the house and started conducting viewings. In a weeks time he found a potential tenant, took a non refundable holding deposit of £300 from that tenant to reserve the property for him and started referencing him.

    During midst of referencing process the tenant decided not proceed with the tenancy and surrendered their holding deposit as it was non refundable. Whilst the agent is again advertising the property and trying to find another tenant, he claims that the holding deposit belongs to him and not me.

    My argument is that the deposit is mine (minus some admin charges from agent) as I am the one who will lose the rent for having my time wasted by the tenant who decided not to proceed with the tenancy.

    I need some suggestions here on how to proceed with this situation. The holding deposit belongs to whom? To me or to the agent? Is there a legislation to support that?

    As a general principle of agency law, the agent is not allowed to make profit from their principles asset without the principle's agreement.
    They should deduct their actual costs and pass the rest on to you.

    They won't and you don't really stand a hope in hell of getting the money.
    Your next step would be legal action, and that's not going to get the property let.

    If the tenant was prepared to forgo £300 in order not to proceed, there must have been either a genuine problem causing them not to proceed or something horrible was about to come out in the referencing.

    I don't think you have really lost anything.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).


      AS JP says, the tenant has no direct contract with the agent and there is no basis at all upon which they can hold this deposit themselves.

      Was the prospective T given any formal paperwork to state the conditions under which the deposit would not be refunded?

      I think I would
      a) Find a different agent or DIY. An untrustworty agent is far worse than not having one at all.
      b) As a matter of principle put in a MCOL claim, and give them a little publicity amongst local landlords.


        I think you should make the effort to complain to the Property Ombudsman or any other redress scheme that they are part of. I have had the similar issue with the estate agent and I am currently in the process of complaining. TPO are helpful and available over the phone - it may take a while to get a response but worth putting it in. But you will have to complain to your estate agent first and get their final response.
        As Andrew says, ditch them - I ditched mine too but regretted not firing them any earlier.


          Sorry forgot to add, there are similar case precedence on TPOS website (search holding deposit) and it was ruled in favour of the landlord.
          The principle is simple - the holding deposit should be treated as Client's money - its not your money but they are entitled to deduct their costs from it and the rest should be discussed and agreed with you.

          TPO Clause 10k (v. 2019) states,
          Where you intend to retain a holding deposit you should consider whether it is reasonable to retain all or part of the deposit and provide the prospective tenant with a written explanation as to why you have taken that decision within seven days of event set out in paragraph charge for work that has been carried out or reasonable costs that you have incurred as a result of the tenant not entering into the tenancy, taking into account individual circumstances. Your explanation must include evidence of your costs (e.g. referencing checks) and details of any amount paid to a landlord as compensation for the period the property was removed from the market.

          TPO Clause 10m (v.2019) states,
          For tenancies falling outside of the scope of the Tenant Fees Act 2019, where you take a holding deposit from a tenant this must be treated as clients' money except insofar as it will be used to meet the costs of referencing and other reasonable administration charges. You must explain the purpose of the holding deposit and its use in writing, including the circumstances where it could be forfeited or refunded, before any tenant is committed to paying.


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