1 month rent in advance to secure place = deposit?

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    1 month rent in advance to secure place = deposit?

    Hello,

    We'd like to skip the deposit and not take one but our tenant isn't confirming anything yet so we'd like to give them a deadline to give us a months rent in advance to secure the place but we'd like to state no refund allowed if they decide not to rent the place in a few weeks time so would this be decided by the court etc as a deposit? should we state it on our agreement that we will take 1 months rent in advance to secure their place and that this will cover their rent for the first month if they move in but if they decide to not move in there's no refund?


    Many thanks

    #2
    If T paid this payment, would their next rent be due on the move-in date, or 1 month later?

    Comment


      #3
      You should take a holding deposit (fee) which can be retained if the tenant fails to go through, though you cannot retain if the tenant fails checks as YOU are then rejecting.
      If you take more than your monetary losses for taking the property off the market and re-advertising this is deemed a penalty and would not be upheld by the courts.
      Suggest one week's rent.
      Holding fee agreement available here:
      http://www.landlordzone.co.uk/agreements.htm

      Comment


        #4
        The problem you have is that if you extract cash from the prospective tenant you have to agree something in return; if you do not there is no contract and you have to return the cash. Short of getting involved in complications such as options or conditional contracts which require professional drafting, there is not a lot you can do. If you take a "reservation fee" you have to set out precisely what it is you are reserving and for how long and phrase the whole very carefully and not charge too much to prevent the arrangement falling foul of the Unfair Terms in Consumer Contract Regulations.

        In short, it comes to doing the deal or not doing the deal.

        Comment


          #5
          Thank you for your reply, it would be due one month after they move in it's just that we don't want it to drag on any longer and we need to rent out the property asap. thanks

          Comment


            #6
            thanks ever so much for your reply, Would the holding fee be seen as a deposit? it's just that they say they can't move in till 2-3 weeks time so we want to make sure they'd definitely be taking the place, we said we would agree to sign the tenancy agreement on the day the advanced rent is given too, thank you

            Comment


              #7
              Thank you for your reply it is much appreciated, We agreed to reserve the place for them if they could give us some assurance they'd definitely be taking the place by giving us a cheque/ cash for a month in advance rent, it's just that they won't be moving in till 2-3 weeks time and so we'd be losing out on rent if they decided after those few weeks to not rent the place. We're willing to sign the tenancy agreement on the day. The months rents would be around £450 ish. Many thanks

              Comment


                #8
                This thread by Lawcruncher (see above) should give you a more in-depth picture.

                I would question your decision not to take a deposit - or at least urge you to ensure you have some sort of security. Evicting a non-paying tenant can take many months, can you afford not to receive rent for 5 months? That is going to cost a lot more than an extra week or so empty now.

                Comment


                  #9
                  I read that a holding deposit wouldn't need to be protected but should I sign a tenancy agreement (tenancy agreement would start on a later date) on the day the holding deposit is given or should I wait till they move in? Your help is much appreciated, thanks

                  Comment


                    #10
                    Thanks, I believe the deposit would be a bit too much of a hassle and we don't know how to protect it so have decided to skip it in case it creates complications in the future if we evict them. would you say £450( months rent) as a holding fee is reasonable? many thanks

                    Comment


                      #11
                      Protecting a deposit is very very simple. Especially if you use DPS. It would create more complications in the future if you did not have one and needed to charge the tenants for damage.
                      I offer no guarantee that anything I say is correct. wysiwyg

                      Comment


                        #12
                        Originally posted by jta View Post
                        Protecting a deposit is very very simple. Especially if you use DPS. It would create more complications in the future if you did not have one and needed to charge the tenants for damage.
                        Thank you ever so much! I've decided to follow your advice and register with DPS but I'm just a little confused as to how it works so I'll try to read around

                        Comment


                          #13
                          With the DPS, you...

                          Register for free
                          Take deposit of tenant
                          Send deposit to DPS
                          Issue tenant with 'prescribed information' which tells them about the scheme.
                          Your tenant will be sent a receipt by DPS with a PIN type number.

                          At the end of the tenancy, if both parties agree, you both go to DPS website and tell them how to distribute the deposit.
                          If you disagree, you have the choice between having their free arbitration service settle the matter (if both sides agree) or the tenant can commence a court claim.
                          If tenant goes missing (therefore you can't get their agreement for deductions) there is a method to deal with this.

                          For any deductions for damage, you will need proof of the condition of any damaged item at the start of the tenancy - a signed detailed inventory/condition report is the usual method.

                          Usual deposit amount is between 1 & 1.5 months rent. Landlords are usually advised not to take more than 2 months deposit - and to be honest, more than that would put the majority of tenants off.

                          Comment


                            #14
                            Originally posted by beth View Post
                            TWe agreed to reserve the place for them if they could give us some assurance they'd definitely be taking the place by giving us a cheque/ cash for a month in advance rent, it's just that they won't be moving in till 2-3 weeks time and so we'd be losing out on rent if they decided after those few weeks to not rent the place. We're willing to sign the tenancy agreement on the day. The months rents would be around £450 ish.
                            Firstly, have you done credit/reference checks on the prospective tenant?

                            If you have, and the references are satisfactory, all you have to do is ask for a month's rent in advance (plus a deposit) in cleared funds, and then sign a tenancy contract with T with a fixed term starting in 2-3 weeks' time. The contract would be binding on both parties. If the T pulled out before moving in, you'd be entitled to compensation for your losses for T's breach of contract. So, basically, they'd be liable for rent for at least until you found another tenant (and you'd have an obligation to try to find a replacement ASAP).

                            If you haven't done the checks, and you might reject them if the references came back unsatisfactory, then a 'holding deposit' isn't really much use, because you'd almost certainly have to refund it to T if you didn't proceed with the tenancy.

                            Comment


                              #15
                              Originally posted by westminster View Post
                              Firstly, have you done credit/reference checks on the prospective tenant?

                              If you have, and the references are satisfactory, all you have to do is ask for a month's rent in advance (plus a deposit) in cleared funds, and then sign a tenancy contract with T with a fixed term starting in 2-3 weeks' time. The contract would be binding on both parties. If the T pulled out before moving in, you'd be entitled to compensation for your losses for T's breach of contract. So, basically, they'd be liable for rent for at least until you found another tenant (and you'd have an obligation to try to find a replacement ASAP).

                              If you haven't done the checks, and you might reject them if the references came back unsatisfactory, then a 'holding deposit' isn't really much use, because you'd almost certainly have to refund it to T if you didn't proceed with the tenancy.

                              Thanks ever so much! we shall do exactly this =)

                              Comment

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