Holding Deposit

[K3AAK]

Can anyone tell me the correct direction to go. A tenant has given a deposit to rent my property 2 weeks later decides not to rent but wants deposit back, where do I stand legally please.

[Richlist]

Presumably the tenant has not moved in, the tenancy has not started and you want to know if you are required to return the money ?

I'm sure that someone far more knowledgable than me will be along shortly.....in the meantime here are my thoughts:-

1. Never, NEVER refer to money received in return for holding/ reserving a property for a tenant as a deposit......its always best to call it an 'administration fee'. If its a deposit then its subject to deposit protection......which presumably hasn't been complied with ?

2. When taking an 'administration fee' its best to provide the terms in writing....ie non refundable, used for references etc. Was this done ?

If situation is different please advise.

[K3AAK]

Presumably the tenant has not moved in, the tenancy has not started and you want to know if you are required to return the money ?

I'm sure that someone far more knowledgable than me will be along shortly.....in the meantime here are my thoughts:-

1. Never, NEVER refer to money received in return for holding/ reserving a property for a tenant as a deposit......its always best to call it an 'administration fee'. If its a deposit then its subject to deposit protection......which presumably hasn't been complied with ?

2. When taking an 'administration fee' its best to provide the terms in writing....ie non refundable, used for references etc. Was this done ?

If situation is different please advise.

[K3AAK]

Thank you for your prompt reply,

No the deposit protection wasn't complied with at the time, my intention was to do this once the tenancy agreement was signed etc.

Nothing was put in writting at the time either.

Oh dear, where do I stand now??

I had to re advertise the property, drive 260 miles to arrange viewings and it was over a month later that I eventually rented it.

[Richlist]

Subject to a definitive legal answer being supplied by someone else....

If I were in your shoes I'd deduct any expenses, return the rest and let the failed tenant take legal action......they probably won't bother.

But, I wouldn't deduct expenses such as advertising costs or mileage. You would have incurred both as part of ongoing marketting anyway.....they are of course tax deductable.

I'd claim for the cost of things like references & rent guarantee insurance cancellation costs.

[K3AAK]

Yes, they are threating legal action, sending texts at unreasonable hours etc.

I would be gratful for any legal answers as to how to answer them in legal terms as well as covering myself.

Thanks again.

[Richlist]

People often threaten legal action but never follow it up. They expect the threat to do the trick but the secret is in calling their bluff. However, I can understand how you would be concerned.

You could try contacting these people.....they have a free helpline and may be able to give you the advice you seek:

http://www.landlorda....co.uk/site.php

[Grampa]

It all down to what basis and what was said when you took the fee. It would be down to you if it went to court to convince the judge it was non-refunderable if they pulled out.

I suggest you return a portion of it as Richlist says but I suggest you sent a chq with a letter stating it is for full and final settlement in the return of the holding fee. If they then cash/bank it thereis a good legal arguement that they have agreed to it.

[K3AAK]

Thank you both very much, you have been very helpful, I'm sure this has happened to someone like myself in the past. My thoughts were if you put a deposit on the purchase of a property or a car for example and two weeks later you decided it was not for you, then you would not be able to get that deposit back?

This person was fully aware at the time that this was a 'holding deposit' until we agreed a date for moving as the property was been decorated at the time when the tenancy agreement was signed this 'deposit' would then become the deposit, hopefully I'm making myself clear!!

I think I will take your advice and send a letter with a cheque.

[Carryon Regardless]

The important part is the understanding between the two parties.

Then, as later understandings more often differ, the tricky bit is demonstrating that understanding.

The potential T may well be liable for out of pocket expenses and losses, but really only if demonstrable.

Negotiate it to a close citing the lost 2 weeks and re-advertising costs.

[Melboy]

Here is my view on the subject as I have been here in the same situation.......

Return the "deposit" minus any reasonable expenses. You cannot legally hold the whole amount as you have nothing in writing to state that an amount of money is non refundable for referencing etc.

In my circumstances a prospective tenant handed me £500 deposit but backed out 2 weeks later. I returned £450 of that money to them by agreement.

I like an easy life.

I am assuming the deposit is several hundred pounds? You don't actually say?

Mel.

[K3AAK]

Yes the deposit was £500

[anita.z]

Dear Suzzy

I'm no expert but this advice is given to private tenants by one Council and it's also very clear what the Landlord shoud provide. I hope that helps.

"It is fairly common for landlords and letting agents to request a holding deposit but this practice is arguably illegal as the holding deposit could be regarded as a 'premium'. Premiums are defined as any money which has to be paid additional to the rent in order to secure a property. Section 82 of the Rent (Scotland) Act 1984 and Section 88 of the Housing (Scotland) Act 1988 prohibit landlords and letting agents from requiring tenants or prospective tenants to pay premiums.

If however, you find yourself in a position where a landlord or letting agent asks you to pay a holding deposit and you are happy to do so in order to secure the property, you should consider the following points;

• The landlord or agent should provide a written document or contract which explains what the holding deposit is for and any terms and conditions as appropriate. Landlords are not allowed to use unfair contract terms such as a statement that says that all of the holding deposit will be forfeited if the prospective tenant decides not to accept the tenancy.
• You should avoid paying a holding deposit with cash - credit card or cheque is preferable. The landlord should provide a receipt, regardless of the payment method used.
• If you have paid a holding deposit and subsequently decide not to take on the tenancy, the landlord is likely to try to retain your holding deposit to offset costs and losses. In most cases however, landlords can only legally retain an amount that is equivalent to the reasonable cost of re-advertising the property. Landlords cannot retain your holding deposit to offset rent loss whilst the property is empty.
• If the landlord subsequently decides not to let the property to you for whatever reason then all of the holding deposit must be returned.
• If the landlord has failed to get you to sign a contract which outlines the terms and conditions of the holding deposit, then there are no grounds for the retention of the holding deposit if either party changes their mind.
• If the landlord changes any of the terms and conditions of the offer of tenancy after the holding deposit has been paid and you decline the tenancy in view of these changes, all of the holding deposit must be returned. "

[K3AAK]

It looks like the landlord has no rights at all!!!

Think I'll become a tenant???

On a more serious side, I agree with legalities to protect people and I know they have been some ' dodgy ' landlords in the past but the law seems to have changed in favour of the tenant if you ask me.

[Chestnut]

In this case I would have repaid £500 in full* to maintain 'moral high ground', let alone legalities, which clearly tend to support tenant. *Perhaps deduct any new advert fees with enclosed copies of receipts, but is it worth the hassle?.

In reality the biggest loss to landlord is lost rent from the delay in reletting but that would be difficult to prove in court.

Re ArticCat contribution, I had assumed in this case that tenant offered holding deposit, rather than requested by landlord. Makes no difference to my comment, however.

[anita.z]

I agree with Suzzy, landlord seems to have very few rights and reading the advice that I posted earlier, there seems to be little or no point for the holiding deposit at all. In my mind I always thought that it was like a reservation fee; and if you later (as a tenant) changed your mind, you would lose it as a compensation for the Landlord taking the property 'off the market' and therefore losing other possible prospective tenants, re-advertising costs, etc. Apparently not the case.

Makes it very tricky for the landlord - if you get prospective tenants coming to have a look 1 month or 6 weeks before they can move in; unless the Landlord takes the property off the market they will not feel comfortable handing in their notice for their current place and then, in most cases they will continue looking anyway and yes, if they then change their mind a week prior to moving in - that's all Landlord's loss....

With our last void we had a nice couple coming to see the flat at the end of August but they were not in a position to move until 1 Oct. I said to them that I'd keep the flat on the market and continue to show it to other prospective tenants and for them to contact me again around mid-September to see if it was still available. They did, and as the flat had not been let, then at that point we progressed straight to referencing (at their cost) and they moved in October.

[K3AAK]

Thank you ArticCat,

that is my way of reasonable thinking, if somebody wants something it is not available now but will be in 2 or 3 weeks time for example surley to give someone a deposit to secure that thing /article / item or whatever you want to call it that you want to buy or rent and if you decide later that you don't want it, what would be the outcome???