Is this legitimate? Holding Fee becomes 1 Month Rent

[Username]

Hello.

I have been going through a convoluted 2 days and would appreciate any advice. I have been flathunting with friends. We visited a property, really liked it, and were told we had to put a 300£ fee to keep the property off the market (i.e: a holding fee, but including admin charges, and they called it 'reservation fee' at one point).
We were sent an email with a Tenant application form and associated Terms of Business for renting. We read it quickly and transferred the 300£ (holding fee & admin fee), with the knowledge that within 2 working days we were required to submit all necessary documents/ referenced etc and 1 month's rent.

Closer inspection of the Terms of Business and I see the small print: If we withdraw our application (change our mind) OR our credit history or landlord references are "adverse", we will lose the 300£ fee AND the 1 months rent (£2000)!! And this is all before we even sign a Tenancy Agreement.

If we do not pay the 1 months rent within the 2 working days, the property would go back on the market. However, from my google searches, I am led to believe that the holding fee (which we have paid) is made for the purpose of keeping the property off the market, so I don't know why we are asked to also pay 1 month's rent for the same purpose.

So basically the 300£ becomes a temporary holding fee which lasts for 2 days and the 1 months rent is the REAL holding fee? is that legal?

We have no problem about paying the 1 months rent - we want the flat. BUT

1) it seems unfair that we could lose 1 months rent if our credit check or landlord references are "adverse" (vague term there).

2) it also seems unfair to give 1 months rent without signing anything (proper Tenancy Agreement). We have repeatedly told this to the letting agent, but he says we can only sign a tenancy agreement when our tenancy application is accepted (i.e: after all the docs/ references are checked) - and for our tenancy APPLICATION to be accepted/processed, we need to pay a month's rent.
To which I replied that we could only pay 1 month's rent when we were accepted as tenants...



4) the letting agent was very understanding & flexible regarding the signing of the Tenancy APPLICATION and the time frame within which we had to supply docs/references (we're still getting it all together) - but was adamant that the 1 months rent had to be paid within 2 days (so tomorrow).

So we are asked to pay rent before signing the contract (or even seeing the contract), because they need time to check our credit/ references before accepting us as tenants/ getting us to sign the contract. So I really dont understand why we are asked to pay rent before the credit/references are done, because us paying rent implies we are tenants, but without any protection for the rent....

ANYWAY - we've spent all day emailing & calling the letting agent who has made an amendment to terms of business: we only lose the 1 months rent if our credit hist or references are "adverse" (not if we pull out). Still seems shocking to me.

But he will not budge on the fact we have to pay 1 months rent tomorrow (without signing a contract) - and if we dont, we lose the 300£, plus 65£ for every day the property has been off the market (even though the move in date is in 1 month...), and the property will be put on the market again...

Sorry for needless repetitions.
Can a holding fee only 'hold' the property for as little as 2 days?
Are they allowed (i.e: is it 'fair' according to the OFT etc) to keep 1 months rent merely if we have a bad reference?
Are they allowed to use 1 months rent as what is basically a (second) holding fee?

This whole thing has made us want to leave the letting agent - will we get out 300£ back? We havn't and will not pull out, we want to sign the tenancy but not after we pay rent..

I just dont understand the order they want to do it in:
holding fee --> rent --> credit check --> tenancy signing

Isnt the whole point of a holding/admin fee to do the credit/reference check and IF the results are ok, THEN ask for rent/ security deposit and signing of contracts....?

Again, sorry for the long post...

Any advice would be so very appreciated!

[dominic]

Why not point out to the agent that it appears the first month's rent is a security deposit within the definition of the HA 2004, and therefore it is being provided on the condition that it will be protected with 14 days with one of three deposit protection schemes.

I assume your total annual rent is <£25,000.

[Lawcruncher]

Have a look here: http://www.landlordzone.co.uk/forums...ad.php?t=13840

The terms are indeed shocking.

As I have said elsewhere it is time for tenants to start resisting all these payments upfront. Landlords and their agents have a product to sell. If you do not like their terms tell them so. If they say they may let elsewhere then say: "Fine. Good morning."

[Poppy35]

Have a look here: http://www.landlordzone.co.uk/forums...ad.php?t=13840

The terms are indeed shocking.

As I have said elsewhere it is time for tenants to start resisting all these payments upfront. Landlords and their agents have a product to sell. If you do not like their terms tell them so. If they say they may let elsewhere then say: "Fine. Good morning."

I totally agree and I am one of these LA! Our terms are very clear and I feel very fair. We sometimes have applicants who moan about the fee - some are really rude and we let these people walk away however if someone seems good on paper I will certainly look to reduce fees etc as its in everyones interests to get the property let.

If you dont want the house walk away but if you do it may be that you have to put up with their requirements.

[Lawcruncher]

But why are tenants being charged fees? They never used to be - except perhaps to pay for a solicitor to draw up the agreement which they never seem to do these days anyway.

[Sportingdad]

But why are tenants being charged fees? They never used to be - except perhaps to pay for a solicitor to draw up the agreement which they never seem to do these days anyway.

Well since the increase of tenants rights-lefty/tree huggers take note(the delays caused by the courts/deposit protection/loses job and advised by council to stick it out) our referencing company application have increased from 2 to 5 pages on the tenant and from 2 to 4 pages on the guarantor, we take insurance out on everyone possible or a whopping deposit of 4/6 months, the check-in now involves fully drafted inventories signed by each tenant on each page (just browsed a not unusual 18 pages two bedroom unfurnished one) with photos and video recording which generally takes 4-6 hrs to produce/type up, a meet at the property with an inspector to agree everything on site that involves from leaving our office to returning 1.5 to 3 hrs which may involve taking taxis because parking impossible/tube/buses 50% too slow or far from property, so everything is done properly to comply with rules the last government introduced and we also have a shortage of properties so who's going to pay the vendor or the end customer ?????

[mind the gap]

Well since the increase of tenants rights-lefty/tree huggers take note(the delays caused by the courts/deposit protection/loses job and advised by council to stick it out) our referencing company application have increased from 2 to 5 pages on the tenant and from 2 to 4 pages on the guarantor, we take insurance out on everyone possible or a whopping deposit of 4/6 months, the check-in now involves fully drafted inventories signed by each tenant on each page (just browsed a not unusual 18 pages two bedroom unfurnished one) with photos and video recording which generally takes 4-6 hrs to produce/type up, a meet at the property with an inspector to agree everything on site that involves from leaving our office to returning 1.5 to 3 hrs which may involve taking taxis because parking impossible/tube/buses 50% too slow or far from property, so everything is done properly to comply with rules the last government introduced and we also have a shortage of properties so who's going to pay the vendor or the end customer ?????

I only hope that the many documents you seem to shove out at LLs and Ts make more sense than this unpunctuated mass of rambling verbiage.

[jeffrey]

Well since the increase of tenants rights-lefty/tree huggers take note(the delays caused by the courts/deposit protection/loses job and advised by council to stick it out) our referencing company application have increased from 2 to 5 pages on the tenant and from 2 to 4 pages on the guarantor, we take insurance out on everyone possible or a whopping deposit of 4/6 months, the check-in now involves fully drafted inventories signed by each tenant on each page (just browsed a not unusual 18 pages two bedroom unfurnished one) with photos and video recording which generally takes 4-6 hrs to produce/type up, a meet at the property with an inspector to agree everything on site that involves from leaving our office to returning 1.5 to 3 hrs which may involve taking taxis because parking impossible/tube/buses 50% too slow or far from property, so everything is done properly to comply with rules the last government introduced and we also have a shortage of properties so who's going to pay the vendor or the end customer ?????

To calm mind the gap's fevered brow, let's reword that as follows:

1. There has been an increase in:
a. tenants' rights and lefty tree huggers;
b. delays caused by the courts, deposit protection requirements, and tenants who lose their jobs but are advised by the Local Housing Authority to stay put.

2. Our referencing company application form has increased from 2 to 5 pages (tenant) and from 2 to 4 pages (guarantor).

3. We take insurance out on everyone possible (or a deposit equal to 4-6 months' rent).

4. The check-in now involves an inventory signed by each tenant on each page (18 pages long, in a recent case) with photographs and video recording. These take 4-6 hrs to produce/type up. We also have to meet at the property with an inspector to agree everything on site- this involves (from leaving our office to returning0 1.5-3 hrs and perhaps use of taxis because parking is impossible and tube/buses are too slow or too far from the property.

5. Everything is done properly to comply with rules the last government introduced.

6. We also have a shortage of properties.

7. So who's going to pay- the vendor or the end customer?

[dominic]

The question is, are the fees charged to tenants in the best interests of the principal (the LL)? A T may be put off renting the property if it knows it must dole out £300 before it even has a binding tenancy agreement.

Are any profits made thereby declared to the LL? Agents cannot make a secret profit.

[jeffrey]

The question should be unnecessary. The Letting Agent is L's, not T's, so L should pay all fees.
That does not preclude L from having a contractual right (in the Letting Agreement or otherwise) against T to recover such expense, of course.

[dominic]

You keep saying this, but your use of the word "should" is ambiguous.

Just because A is agent of P, does not mean (legally) that A cannot (or indeed shouldn't) enter into a contract as principal with P's customer, C, provided that A is not in breach of its express and implied duties owed to P.

Yes, ok, it goes against the principle of a commission based payment, but why can't A, P, and C agree whatever they like amongst themselves?

[mind the gap]

You keep saying this, but your use of the word "should" is ambiguous.

Just because A is agent of P, does not mean (legally) that A cannot (or indeed shouldn't) enter into a contract as principal with P's customer, C, provided that A is not in breach of its express and implied duties owed to P.

Yes, ok, it goes against the principle of a commission based payment, but why can't A, P, and C agree whatever they like amongst themselves?

At last - some sense. As dominic suggests, this is precisely what an A does every time a prospective T walks through his door and asks A to find him a property to rent. A contract is entered into between T and A, independent of the one between A and LL, which I have described to Jeffrey virtually every time he starts on about how it is the LL and not the T who has a contract with A. I cannot think how to explain it any more clearly than I already have. However, since you (jeffrey) have clearly forgotten (again!) what dominic and I said last time I referred you to it, here it is again - please see #7 onwards:

http://www.landlordzone.co.uk/forums...+supply&page=2

[jeffrey]

You keep saying this, but your use of the word "should" is ambiguous.

Just because A is agent of P, does not mean (legally) that A cannot (or indeed shouldn't) enter into a contract as principal with P's customer, C, provided that A is not in breach of its express and implied duties owed to P.

Yes, ok, it goes against the principle of a commission based payment, but why can't A, P, and C agree whatever they like amongst themselves?

If you were right, how would you construct the terms of your imaginary contract between A and T?

[dominic]

It is simply an agreement for services (sometimes called a supply of services agreement).

In return for a fee paid by C to A (as principal), A (as principal) performs work for C.

The ingredients for a contract are:

a. a valid offer which has been validly accepted;
b. consideration; and
c. intention to create legal relations.

Why can't C form a contract with A, with A contracting as principal?

[jeffrey]

Clearly because:
a. T intends to contract only with L (for accommodation) and not with A; and
b. L's contract with A precludes- expressly or impliedly- the secret arrangements that you contemplate.

Moreover, suppose that A carries-out work for T but defectively. Whom would T sue?