Deposits not held for security

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    Deposits not held for security

    Goodwill deposit

    This is when the tenant pays over a sum to show he is serious. It is repayable on demand.

    Holding deposit

    The intention here is that the tenant pays over a sum on the understanding that the property is not offered elsewhere. If it is declared to be non-refundable then there has to be an obligation on the part of the landlord. It is, I suspect, rarely set out clearly what that obligation is. If the arrangement is vague there is no contract and the deposit will be refundable. If the arrangement is not vague then what we have is effectively an option for the tenant to take the tenancy. If it is an option for the tenant to take a tenancy, then that presents difficulties for the landlord if he has not set out clearly what conditions are to be fulfilled before the option can be exercised. The drafting of options is best left to experienced conveyancers.

    Money on account of rent

    This is a sum paid to be applied as rent for the first period of the tenancy. As soon as money is accepted as rent there is a contract for a tenancy - again problems for the landlord if the tenant has not been checked out. If the money is held on the basis that it will be applied as rent if a tenancy is agreed, then the money is repayable on demand; a contract has specifically been denied and there is no legal basis to hold the money.

    Agent's administration fee

    A sum paid to cover the agent's expenses and compensation for his time and trouble if the tenant does not proceed and on the basis that, if the matter does proceed, it will not be taken for expenses, but applied towards the first payment of rent. No problem there it may be thought, but the payment is made for the benefit of the agent – the landlord does not come into it. So, the arrangement is purely with the agent. If the arrangement is with the agent we have to ask if there is a contract. What would such a contract be for? Everything the agent does is for the benefit of the landlord. No service is supplied to the tenant. There is no exchange of promises between the agent and the tenant. Looks like there is no contract and that the money is repayable on demand.

    Two conclusions from the above:

    1.If an agent or landlord accepts money too early that may bind the landlord before the landlord should be bound

    2.If there is no obligation to the tenant any money paid is repayable on demand

    The problem in all property negotiations is this:

    A. Neither party is bound to the other until there is a contract

    B. If no contract is concluded neither party is liable for any expense or loss that may be incurred by the other.

    You cannot get round B. Property lawyers have had a go, but no workable scheme has emerged to square the circle.

    #2
    I am concerned about the holding deposit.

    I am considering a flat in London and the Lettings Agent wants to charge a £500 holding deposit (which seems v.high to me - compared to what I have paid in the past) They explain that this money is then deducted from the amount I have to pay - Admin fees, referencing, deposit etc. Surely this 500quid cant be used as part of the deposit meaning that really this 500quid is just admin fees & referencing which seems huge?

    does this make sense or am I just confusing myself?

    Comment


      #3
      Maybe they are saying that if they give you the tenancy, Part of the £500 will go towards admin fee, referencing and security deposit that is refunded to you at end of tenancy, if there is no unpaid rent or damage to property.

      Why do you feel that holding deposit of £500 can not be used towards tenancy deposit?

      surely it is same thing as they return you the money and then you paying it back to them as security deposit.

      Comment


        #4
        If it's in London, the rent may well exceed £25 000 per annum- so:
        a. it would not be an AST; and therefore
        b. the Deposit Protection rules would not apply.
        JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
        1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
        2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
        3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
        4. *- Contact info: click on my name (blue-highlight link).

        Comment


          #5
          Originally posted by Lawcruncher View Post

          Agent's administration fee

          A sum paid to cover the agent's expenses and compensation for his time and trouble if the tenant does not proceed and on the basis that, if the matter does proceed, it will not be taken for expenses, but applied towards the first payment of rent. No problem there it may be thought, but the payment is made for the benefit of the agent – the landlord does not come into it. So, the arrangement is purely with the agent. If the arrangement is with the agent we have to ask if there is a contract. What would such a contract be for? Everything the agent does is for the benefit of the landlord. No service is supplied to the tenant. There is no exchange of promises between the agent and the tenant. Looks like there is no contract and that the money is repayable on demand.
          Lawcruncher

          Do you extend this to mean that agents should refund referencing fees if it all falls through (even when a T pulls out)?

          Why cant "agent" have a contract with tenant?

          Most 'agents' are not true agents in the way they operate ... many seeking their own convenience rather than wishes of LL.

          Cannot an agent specifiy their own terms and conditions regarding the introduction of tenants, as a separate issue from more general management. Part of this would include entering into agreements with tenants.

          Would it necessary for agents to call themselves by another name eg. a 'rental arranger' so that consumers are able to judge there is a difference?

          I'm too lazy to check, but I think OFT guidlines do allow for admin to be deducted from holding deposit.
          All posts in good faith, but do not rely on them

          * * * * * ** * * * * * * * * * * * *

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          Comment


            #6
            " Money on account of rent "

            How does this apply to a situation, if the landlord has taken it in full (as Reservation and a Month's rent), No contract has been drawn at all, nothing in writing to confirm £ was taken as reservation, tenant simply had no time to sit with Landlord to sign Agreement.

            Then, Tenant terminates the "verbal" contract after a week due to a dispute regarding a rule enforced by the Landlord about not permitting guests to overstay the night.

            Again nothing on writing for landlord to verify this, but his argument is that it would have been included in the contract that the tenant did not "bother" to sign.

            Nevertheless, is the tenants money repayable on demand; as a contract has not been signed and there is no legal basis to hold the money, other then what was agreed verbally with the tenant.

            Comment


              #7
              An AST does not need to be in writing; even an (appropriately-evidenced) oral letting arrangement is capable of creating an AST.

              So did T ever move-in? If so, that's quite good evidence of an AST and a contractual obligation on T.
              JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
              1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
              2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
              3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
              4. *- Contact info: click on my name (blue-highlight link).

              Comment


                #8
                Yes sir, the tenant did move in, and stayed for 7 days.

                I feel as though I am stuck in the middle though. They are both very good friends of mine, I recommended the T to the L.

                The T has decided to fill a Money Claim Online Order thingy. But I advised her that I dont think she's got a leg to stand on, as she's the one that decided to terminate the tenancy on her own will, gave no notice, but her argument is she was never told at the start that her boyfriend was not allowed to stay over. She reckons that her rights as a Tenant were infringed by the L.

                The Landlord is sitting on the fence and only refunded her a week's rent back, and retained what he thinks he deserves for the period the property remained empty.

                I think I need to read into an AST then, and find out whether the L is overlooking the rights of T.

                Comment


                  #9
                  If there's no written AST, there are no tenancy obligations/restrictions clearly applicable to the letting. L could not restrict co-occupation by the boyfriend. This highlights the unwisdom of giving possession without a written AST.
                  JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
                  1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
                  2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
                  3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
                  4. *- Contact info: click on my name (blue-highlight link).

                  Comment


                    #10
                    I understand this, but what happends if the tenant was never available to sign, and in all honesty the T was very careless with her £, she handed over a sum of money without signing a contract or even collecting a key.

                    So, again do you not think the L has a valid argument in this headache.

                    Comment


                      #11
                      Originally posted by Summer View Post
                      I understand this, but what happends if the tenant was never available to sign, and in all honesty the T was very careless with her £, she handed over a sum of money without signing a contract or even collecting a key.

                      So, again do you not think the L has a valid argument in this headache.
                      Yes and no
                      Yes, there is a valid tenancy, created by T's actions in paying rent and taking occupation.
                      No, so far as concerns the restriction on occupation which L seeks- nothing in writing means that it's not binding on T.
                      JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
                      1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
                      2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
                      3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
                      4. *- Contact info: click on my name (blue-highlight link).

                      Comment


                        #12
                        Sorry I dont mean for this to drag on, but are there particular rules as in this scenorio if the landlord lived in the same property, meaning the T is at an advantage point, or is the situation no different.

                        From what I remember the house was not converted to Flats.

                        Comment


                          #13
                          On the same note, The tenant was permitted to use the dryer and shower downstairs also the garden which was accessed through the ground floor (where the landlord lived), the L is saying even though the house has had 2 kitchens from the start she would have signed a Lodger agreement (as she would have had access and free use of the whole house). Does this make things more difficult for the T.

                          Comment


                            #14
                            Originally posted by Lawcruncher View Post
                            1.If an agent or landlord accepts money too early that may bind the landlord before the landlord should be bound

                            2.If there is no obligation to the tenant any money paid is repayable on demand

                            The problem in all property negotiations is this:

                            A. Neither party is bound to the other until there is a contract

                            B. If no contract is concluded neither party is liable for any expense or loss that may be incurred by the other.

                            You cannot get round B. Property lawyers have had a go, but no workable scheme has emerged to square the circle.
                            I believe if the receipt is carefully worded, it can be shown that there is a contract because on taking the deposit the agent/landlord agrees to stop marketing the property. Obviously, if the tenant then fails the referencing or backs out, the landlord will have missed the oppostunity to let the property to another applicant, which is why a holding deposit was taken in the first place.

                            Comment


                              #15
                              Can the landlord take the "administration fee" route? Then the agreement is with the landlord.
                              Assume I know nothing.

                              Comment

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