Holding Deposit - Failed References

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    Holding Deposit - Failed References

    Hi,

    Question about the legality of this situation.

    I paid a holding deposit of £400 to take a property off the market. My and my girlfriend's offer was accepted pending reference check. I then paid a further holding deposit of £600 and provided the requested documentation.

    However I have noticed that the document I signed when providing the holding deposit states - "Please note that in the event of your not passing a reference check, {Mod - name removed} will retain the holding deposit as an administration charge".

    Surely this term is invalid ? It seems impossible to me that they could be allowed to withhold a £1,000 deposit on the basis of what is effectively a free choice for them (since the document I signed also states - "This is only an offer confirmation and does not imply a guaranteed tenancy")

    I assume the term is entirely invalid under UTCCR but my legal knowledge in this area is restricted to one term of contract law and one term of consumer law

    If it makes any difference the yearly rent of the property is £27,820.

    #2
    The OFT agrees with you. Go here and look at paragraphs 3.37 onwards, in particular paragraph 3.39 which says:

    Any party to a contract normally has the right to cancel it and receive a full refund of any prepayments (possibly compensation as well) if the other party breaks the contract in a way that threatens its whole value to him. A term that rules out the refund of a substantial prepayment or deposit, in any circumstances, conflicts with this principle, and is likely to be unfair

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