Prospective puts down holding deposit. Now turns around and wants to pull out.

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    Prospective puts down holding deposit. Now turns around and wants to pull out.

    A very keen prospective T wanted the room advertised as two to 3 other people were interested. She asked if she could put a deposit down to be put first in line.

    I said, ok, just a holding deposit of £200 (off-set against deposit balance of £800 upon signing). 24 hours later after numerous emails, and time spent writing up her AST I get an email she now wants to cancel.

    What should happen to the holding deposit. Am I within my rights to keep it?

    As I have spent time already in anticipation of all ref/credit checks coming back ok, I think I will refund her £150

    Your thoughts on this, as I'm sure many of you LL's have run into this, and how do you normally handle holding deposits, non-refundable?

    #2
    See this post by lawcruncher on the subject of holding deposits etc
    http://www.landlordzone.co.uk/forums...90&postcount=1

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      #3
      Thanks.

      The prospective emailed me asking: I would appreciate if you would consider re-imbursing part of the £200 deposit for the room.

      I replied saying I would refund £150.

      Is this ok?

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        #4
        She emailed back saying she's happy with amount to be reimbursed.

        Going by what Lawcruncher posted, IF the prospect had asked for all the holding deposit back, if I understand correctly I would have had to refund 100%?

        Can anyone confirm, please?

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          #5
          Originally posted by sparkie View Post
          She emailed back saying she's happy with amount to be reimbursed.

          Going by what Lawcruncher posted, IF the prospect had asked for all the holding deposit back, if I understand correctly I would have had to refund 100%?

          Can anyone confirm, please?
          Your assumption is correct, presuming you didn't make the deposit 'non-refundable'. However, she has accepted £150 - Yeah!

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            #6
            In my opinion a deposit can never be non-refundable if it is not supported by a contract.

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              #7
              Refund

              If she says she is happy to get 150 back then go for it - it seems unlikely that she'd say yes and then spend good money on legal advice to later try and get 50 pounds back

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                #8
                Just accept it

                I think you've been very lucky. Just accept that she has been 'a good egg' and accepted that she has put you out.

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                  #9
                  Originally posted by Lawcruncher View Post
                  In my opinion a deposit can never be non-refundable if it is not supported by a contract.
                  Out of interest, if a LL stipulates that the holding deposit is non-refundable, by say email, and the prospect agrees and pays, is this sufficient as a contract, or do you mean actually a written up contract (in the formal sense)

                  Thanks everyone for your responses. Its much appreciated

                  Comment


                    #10
                    Originally posted by sparkie View Post
                    Out of interest, if a LL stipulates that the holding deposit is non-refundable, by say email, and the prospect agrees and pays, is this sufficient as a contract, or do you mean actually a written up contract (in the formal sense)
                    Presumably the answer to this question & similar ones ("is this legal", "will this wording stand up", "they signed this/email back OK, are they bound by that") is the Judge will decide in court if it gets that far..


                    My suspicion is that if LL stipulates & T agrees by email it would be accepted, but you might get a "creatively thinking" Judge on your day in't court...

                    Cheers!

                    Artful
                    I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

                    Comment


                      #11
                      Originally posted by sparkie View Post
                      Out of interest, if a LL stipulates that the holding deposit is non-refundable, by say email, and the prospect agrees and pays, is this sufficient as a contract, or do you mean actually a written up contract (in the formal sense)
                      If you take money and call it a deposit it has to be a sum paid to secure the performance of a contract. You can only have a contract when both sides are under an obligation. If the landlord has no obligation to do anything then there is no contract.

                      Even if you do have a contract, there is no guarantee that you can get to keep the deposit. Section 49 (2) of the Law of Property Act 1925 provides that:

                      "..in any action for the return of a deposit, the court may, if it thinks fit, order the repayment of any deposit."

                      It is well-established that when it comes to sale and purchase contracts the court will rarely order the return of a deposit. In the sort of circumstances we are concerned with here though the court may order the return of a deposit if it feels that the arrangement was unconscionable.

                      What is actually happening when a landlord takes a holding deposit that is declared to be non-refundable?

                      The landlord is saying:

                      "I have a product to sell. However, before I sell it to you I want to make sure you're the right sort. If it turns out you're not the right sort I want to be compensated."

                      and/or

                      "I have a product to sell and I want to sell it quickly. I can't be doing with time-wasters. Either you want it or you don't. Just stump up some cash if you're serious. If you go away and find somewhere better or cheaper that's not my fault. I want to be compensated."

                      What landlords are really trying to do is to get rent or the equivalent of rent from the moment someone shows an interest. They want to be paid for negotiating if the deal does not go ahead. This would be quite unacceptable in the world of commercial property and I do not see why landlords think it should be acceptable for residential property.

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