Holding Deposit

[bhavicp]

Hi All,

We have recently decided to let out our property and have chosen {name removed} as to manage the property as we won't be in the area.

We (they) found some tenants, started/finished referencing, and then 3 weeks in (about 1.5 weeks from move-in date) the tenants decided to pull out. There was a 1 week rent holding deposit paid to the agent by the potential tenants, since they pulled out, it was kept, and I assumed it would be passed to me as I will now be out on at least a few weeks of rent while I look for new tenants (I've been doing the viewings etc)

When I asked {name removed} what happens to this holding deposit, they've come back with "it's been given straight to our referencing partner, hence we do not have it to give to you" - Which doesn't make sense to me as obviously this is initially taken to protect/cover the landlord from exactly this type of situation. I'll also note that their new tenant find fee is 150 GBP, which I assume would cover the referencing etc. Why would they(or this 'referencing partner') get to keep the 1 week's of rent (which is 400 GBP!)

Is this the norm? Do agents normally keep this holding deposit, or is it in most cases passed to the landlord as would be expected? (as it's also a legal thing?)

I've asked for further explanation from them as I'm genuinely confused and am waiting for a further reply but wanted to get the general thoughts on this.

[Lawcruncher]

There has to be a question mark about whether the deposit is refundable to the applicant,. Ignoring that possibility, it may all come down to who signed what saying what. As you suggest, it is the landlord who is "holding" the property and not anyone else and should be entitled to the deposit.

[nukecad]

If it is being taken from potential tenants and paid to a 'referencing partner' then it is an illegal fee.

Attempting to circumvent the law by calling it a 'holding deposit' doesn't change what its being used for and make it legal.

Q. Can I charge a tenant for setting up a new tenancy?
No. you cannot charge a tenant for any activity (except if it is listed in the permitted payments section above) or for your time in setting up a new tenancy. It is a landlord’s responsibility to pay for services they contract, including any costs associated with setting up a tenancy. This includes fees for referencing and credit checks, guarantor fees and administration.

Page 19 of this: https://assets.publishing.service.go...and_agents.pdf

[bhavicp]

The funny thing is, I asked, and if the applicant is successful, then it's used towards the first rent payment... Otherwise the 'referencing partner' gets to keep it. I'm still waiting on their reply. I checked the ToS and it doesn't mention anything about the holding deposit being kept by the agent and not by the landlord.

I'm assuming that if it doesn't specifically mention that the landlord doesn't get it (and/or what happens to), as is the norm, then legally, I should be getting it?

Lawcruncher - In this case, the appliancts pulled out of their own free will, so definitely no question on whether they lose it or not


Got a reply back, have said I would like to escalate this and asked for the deposit to be sent to me.

Thank you for your email, the holding deposit is mainly there to discourage the tenants from leaving during the process but as industry standard we do keep this.

[Lawcruncher]

Lawcruncher - In this case, the appliancts pulled out of their own free will, so definitely no question on whether they lose it or not

A deposit needs to be hooked up to a contract. What was your contract with the applicant?

[nukecad]

... as industry standard we do keep this.

Love it!

'industry standard' simply means 'general practice'.

Translation: It is general practice for property agents to charge/keep fees we are not entitled to.

I still say that because it's being given to what is described as a 'referencing partner' then this is an illegal referencing fee.
The fact that the sucessful tenant gets it back is irrelevant, every unsucessful tenant is being ripped off with an illegal fee.

You should tell the agent to stop doing this for your property(s); you don't want to be associated with illegal fees.

[theartfullodger]

There are no industry standards ... Unless I've missed the approved legislated for list (anyone?). General/common practice yes, but no more

[Lawcruncher]

The industry standards of residential lettings agents are what they have made up as they go along. Some of the nonsense has been so widely disseminated that many agents genuinely believe it all.

Reminds me of a friend whose wouldn't go. She called the garage who said it needed a new engine. She picked up the car with new engine and it broke down soon after. She called the AA. The AA man opened the hood and the first thing he said was that it was the wrong engine for the car. It all went to court and my friend won. The garage owner was deeply incensed and complained he had never had any trouble before with not putting the right engine in a car.

[bhavicp]

There are no industry standards ... Unless I've missed the approved legislated for list (anyone?). General/common practice yes, but no more

So it is common/general practice for the agents to keep the security deposit on unsuccessful/withdrawal applicants? That's absolutely crazy (as a first-time landlord) and I guess I will just have to let this money go...

[Lawcruncher]

You do not have to let it go. Without knowing what all the relevant documents say, it is not possible to say who is entitled to the deposit.

What you need to do is write to the agent and say:

A supposed "industry standard" is not sufficient to justify withholding the deposit because no industry standard has the force of law. You need to show me that you have some legal authority to retain the deposit, such as some document signed by me, a statute or a court case. Either provide such authority or remit the deposit to me.

[jpkeates]

As a general principle, an agent is only allowed to profit from their principle's property if the principle has agreed that.
Letting agent's are signally unaware of this.

[bhavicp]

Lawcruncher,

Great thank you. I did check the ToS I signed, and it doesn't say anything about the security deposit eitherway, just that it will be taken when applicants proceed with an appliaction.

You would never guess what they responded yesterday with

"we might not have an issue here after all.
I do need to confirm this with the tenants but they have advised that their current landlord can release them in time for this tenancy."

I said I am already proceeding with other applications:

"The tenants have come back in now so in regards to the holding deposit (I will check with our in house council about this) it would now be you withdrawing so I believe it would go back to the tenants."

I find it hilarious that they think that because the previous applicants are ready to proceed again, it will be me withdrawing!!!!!!!!!!!!! As a first time landlord, this doesn't even make sense to me. It's absolutely stupid.

I've said to them not to refund the deposit as they officially withdraw, and I still want the security deposit passed onto me ASAP.

I'm now proceeding with new applicants privately instead (through OpenRent for referencing) - This agent is a joke, it's a shame we can't mention names here to warn others. I will probably have to pay their 'tennent find fee' as it's based on an offer being made (which we have 1 of through them) but happy to pay that, get my security deposit and leave.

[bhavicp]

So to conclude, I got the holding deposit back today. No explanation of course from them, just me chasing several more times and then being sent a bank transfer of the amount.

Will be promptly withdrawing from their contract and going privately for now.