Tenant pulls out after reference checks, so holding deposit returned in full?

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    Tenant pulls out after reference checks, so holding deposit returned in full?

    I read similar posts on the forum and did some Googling, but still not 100% clear.

    I had a prospective tenant with a guarantor and she paid the holding deposit and references/credit check were started by the agency. Her guarantor was very difficult and in the end she got a different guarantor. Thought all was fine and the references/credit check came back with no problems. Then she said she had found somewhere else so holding deposit returned and I now need to pay again for references/credit check on new tenants.

    From my understanding once the landlord pays for the references/credit check the tenant would only be liable to cover these if they pulled out after signing the AST and actually moving something into the property. If the tenant pulls out at any point before that they get full holding deposit refunded?

    Would it be good for both tenants and landlords if there was a third party company which tenants could go to and pay to get references/credit checks/right to rent etc. done. With a certificate valid for 1 month. Then come to a viewing and show the certificate, the landlord looks it up at the 3rd party company. Landlord discounts the cost from first months rent. Tenant would benefit as they could use the certificate on multiple places and move in much earlier. The landlord would benefit as tenant is already checked, will move in faster and no wasted costs on failed referencing.

    #2
    Why was the holding deposit repaid? The whole point of a holding deposit is to compensate the landlord if s tenant withdraws in exactly his sort of scenario.

    Comment


      #3
      Do you have a way of contacting the prospective tenant directly ? You might find that the holding deposit was 'refunded in full' (kept by the agent). A forum member recently posted about an agent who insisted that the holding deposit was to be kept by them cover their costs, and not to be given to the landlord, when a prospective tenant pulled out.

      Remember, some letting agents have lost a lot of income since the tenant fees ban came in. There's probably a few porky pies being told to landlords at the minute in order to squeeze them.

      Your idea on referencing seems like a good one.

      Comment


        #4
        until a load of fake certs profilerates... [I was going to edit this typo, but I actually prefer it to proliferates!]

        we don't offer a holding deposit until the applicant has passed refs. IOW, we only offer the tenancy to someone who has already proved suitable. And we make it clear in writing that if they pull out after the HD is paid, they lose it all and why. One other reason we don't take an HD until the applicant is suitable is that you're supposed to pull the listing from the market once the HD is paid.

        Did you take it off the market?

        Comment


          #5
          1) Initial enquiry
          2) issue data processing notice
          3) issue a decent pre-application form (which makes clear the loss of holding deposit in x,y,z situations)
          4) viewing
          5) take holding deposit
          6) begin referencing etc

          If prospective tenant withdraws after step 5 then Holding Deposit is refunded according to loss incurred ie re-advertising and marketing.

          That's how I would handle it.

          Its amazing how many don't wish to proceed beyond step 3.

          My latest tenant was chatting with me yesterday and he explained that he was pleased I did all the various checks as it gave him comfort knowing other tenants were similarly checked and there was less likelihood of anti-social behaviour etc.

          Comment


            #6
            "Holding deposit repaid?" I have emailed the agent to clarify this as I could end up in this situation each time they pull out after the money is spent on referencing, I suspect they may say it's part of the tenant fee ban.

            "Fake certificates" only if 3rd party is hacked, then they would be liable and have insurance.

            "Did you take it off the market?" The agent put the words Let Agreed on the listing if that counts.

            "Tenant pleased with various checks" Most tenants can't be bothered with all the paperwork and time it takes and they know there are landlords who are lazy and will take them if they flash the cash. Plus then if they want they can mess those types of landlords about.

            Comment


              #7
              let agreed is in effect the same thing. It's basically to let the HD payer know that they have reserved the property.

              Originally posted by landlord-man View Post
              1) Initial enquiry
              2) issue data processing notice
              3) issue a decent pre-application form (which makes clear the loss of holding deposit in x,y,z situations)
              4) viewing
              5) take holding deposit
              6) begin referencing etc
              we move the viewing up to step 2. We get a much clearer vibe off an applicant from meeting them in person than from an application form. However, we effectively carry out a pre-application check when we ask them to phone us after their initial enquiry. The conversation is always structured by the same info we want from them e.g. background, employment, benefits, outstanding CCJs etc.

              My concern about refunding partial HD, AFTER paying for credit checks/refs is that you are effectively charging an applicant who is unsuccessful for those fees. Is this strictly legal? The HD is supposed to provide some form of redress for having to remarket the property and any loss of income that might result from the subsequent delay. OpenRent allows you to remarket a property for free for 30 days by the way which means it effectively costs you nothing anyway.

              We suck up the cost of credit checks (which is minimal) because we're 95% sure from our previous steps that the applicant will be successful.

              Comment


                #8
                tatemono My concern about refunding partial HD, AFTER paying for credit checks/refs is that you are effectively charging an applicant who is unsuccessful for those fees. Is this strictly legal? The HD is supposed to provide some form of redress for having to remarket the property and any loss of income that might result from the subsequent delay. OpenRent allows you to remarket a property for free for 30 days by the way which means it effectively costs you nothing anyway.


                Yes it's legal because you're out of pocket due to something the prospective tenant hasn't told you. Otherwise there wouldn't be any point in having a HD and you'd get all sorts of people telling lies because they'd know they wouldn't be out of pocket.

                Comment


                  #9
                  Personally, I wouldn't withhold the full Holding Deposit if my remarketing costs were less.

                  But then I do make it very clear on my pre-check form the reasons why the HD might be retained.

                  As it is free to set-up your own form, email it and receive the results using Google Forms, Im amazed more LLs aren't using it.

                  Comment


                    #10
                    Whether or not the holding deposit was taken out of the preferred sequence, if it was taken properly and in accordance with the tenant fees act, you were entitled to retain it to cover the additional void/expenses and this is what its for. If it wasn't taken in accordance with the tenant fees act or the Agent doesnt understand any of this , I would be looking for a new agent.

                    Comment


                      #11
                      Originally posted by Berlingogirl View Post
                      Yes it's legal because you're out of pocket due to something the prospective tenant hasn't told you. Otherwise there wouldn't be any point in having a HD and you'd get all sorts of people telling lies because they'd know they wouldn't be out of pocket.
                      While I sympathise with you, I'm afraid what you've stated in your first sentence is not legal according to the wording of the Tenant Fees Act 2019 at https://www.legislation.gov.uk/ukpga...dule/2/enacted. The condition on which a holding deposit might not be returned is if a tenant provides "false or misleading information."

                      The fact that they may not have told you something may be because they weren't asked the right questions. For example, we always ask point blank in a phone call immediately after they've enquired about the property if we'll find oustanding CCJs on their record and say that it won't necessarily prejudice their application. What would kill their application is if they say they don't have CCJs and it turns out they do. We tell them as much. We rent all our properties in areas where it's highly likely that applicants would have issues like CCJs on their record so it makes sense to ask this. YMMV.

                      As you say in your second sentence, "telling lies" would make keeping the HD legal, but that's not the same thing as an applicant NOT telling you something.


                      Comment


                        #12
                        a deposit is very strictly speaking the tenants money held in trust by the landlord. Until the tenancy commences, the moneys are held subject to contract. If no contract ensues no deposit is due therefore you have to refund. That's just how it is today; or as they say in French, C'est la guerre.

                        Comment


                          #13
                          Easier to copy/paste

                          When the landlord can keep a holding deposit


                          The landlord or agent can only keep your holding deposit if you:
                          The landlord can’t keep the money for any other reason.

                          For example, you should still get your holding deposit back if you fail a credit check, provided you told the truth about your situation.

                          The landlord must write to you within 7 days to explain why they are keeping the holding deposit. If they don't, they must return the holding deposit in full. If you decide not to rent the property


                          Your landlord or agent can normally keep the holding deposit if you either:
                          • decide not to go ahead with the tenancy
                          • don't take the necessary steps to agree a tenancy by the deadline

                          You should still get your money back if you decide not to rent the property because the landlord has acted unreasonably. This could include if they significantly change the terms of the tenancy or ask you to pay a banned fee. Misleading statements


                          The landlord or agent can keep the money if you have misled them about something that affects whether they offer you a tenancy.

                          For example, if you said your income was a lot higher than it is.











                          By asking the potential tenant to complete a pre-application form, you have it in writing if they fail to mention something which materially affects their application ie if they dont tell you about CCJs for instance.

                          Comment


                            #14
                            Originally posted by flyingfreehold View Post
                            a deposit is very strictly speaking the tenants money held in trust by the landlord. Until the tenancy commences, the moneys are held subject to contract. If no contract ensues no deposit is due therefore you have to refund. That's just how it is today; or as they say in French, C'est la guerre.
                            I'm sorry, but this is nonsense. What would be the point of a holding deposit if that were true.

                            The op said "Thought all was fine and the references/credit check came back with no problems. Then she said she had found somewhere else so holding deposit returned".

                            The tenant fees act in relation to the requirement to repay a holding deposit says "Subject to paragraph 13, paragraph 3(c) does not apply if the tenant notifies the landlord or letting agent before the deadline for agreement that the tenant has decided not to enter into a tenancy agreement"

                            There was no requirement to repay the deposit, subject to my earlier post.

                            Comment


                              #15
                              Originally posted by tatemono View Post

                              While I sympathise with you, I'm afraid what you've stated in your first sentence is not legal according to the wording of the Tenant Fees Act 2019 at https://www.legislation.gov.uk/ukpga...dule/2/enacted. The condition on which a holding deposit might not be returned is if a tenant provides "false or misleading information."
                              That is about the LL deciding not to proceed.

                              Have a look at Schedule 2 Paragraph 10 regarding the tenant deciding not to proceed.

                              Comment

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