AST Clauses, Holding Deposits and Affordability Checks

Reply to the comment left by "Simon Coppen" at "06/03/2014 - 14:02":

Oh no, goodness I could not imagine my tenants stumping up 6 weeks deposit prior to referencing. I refer to it as the holding deposit (held for the duration of the tenancy), but your query was regarding a deposit to hold the property for that tenancy during referencing, sorry. For this we ask for one weeks rent which, if all is well, then reduces the ultimate deposit to an additional 5 weeks. If they pull out and do not take the property then we keep the 1 weeks deposit we hold, but if they fail references we return it.

Your point on appliances - our appliances are all new so once guarantees have expired if anything conked out our appliance repair man would confirm it could not be fixed and we would replace it with new. Twenty years ago we would buy second hand, and still would if it wasn't so awkward and expensive to collect these items. These days we find it far more economical to purchase from a store with free delivery (and topcashback) and they arrange to deliver and install without us having to be involved.

It will depend on who your target market is for this property, whether it is a large HMO etc. and what appliances are in the property but for my 2-bed flats I would not bother with this clause. Also, ...what will you do with a broken appliance, just leave it in the property gathering dust? Will you remove it? When? Prior to new tenants ever viewing (so your present tenants will still be in occupation?) It could lead to disquiet with your tenants who may feel you do not care for your property and I wouldn't be comfortable with not replacing something that had broken

Reply to the comment left by "Yvette Newbury " at "06/03/2014 - 14:34":

Thanks for explaining your deposits, your approach is exactly what I had in mind originally. 1 week "reservation fee", then 6 weeks "deposit" (which the 1 week reservation fee can go towards) and if they pull out I keep the reservation fee.

Regarding appliances, I'm probably just being unnecessarily cautious and am now wondering if such a clause might give the wrong impression to prospective tenants. I would always want to replace/fix the appliances asap. I was just wanting to cover myself in the unlikely event that they all mysteriously stop working...

Yvette

If you take the 1 week and all is well and when they complete you take another 5 weeks so you hold 6 weeks make sure either the whole 6 weeks is all registered within 30 days of collecting the first week, or if there is any danger of not doing so register the first week within the 30 days

Thanks IO, yes I do. I take one weeks deposit during referencing with a proviso that refs will take no more than 1-2 weeks and then they move in. If a tenant had a longer move-in timescale in mind then yes I see your point that the 30 day limit for protection of the deposit could cause a problem. Good point.

This reminds me of a tenant of ours who moved in but asked to pay the remainder of the deposit with the next rent due. I agreed on the basis that they would pay an additional £30 if the deposit was not paid within 30 days of receiving the first deposit to cover my costs if I had to then protect the 2nd part of the deposit separately. This was an incentive and they did pay the 2nd part of the deposit within a week or so of moving in (thereby not having to pay the extra £30) and I was then able to secure the whole deposit in one go.

Re. distinction between holding deposit, tenancy deposit, etc. I don't think that the amount matters as long as it is very clear what the money taken is for.

Romain

The general concensus in almost every debate and discussion I have seen on this subject is that while in perfect world you would be right common sense dictates that the more money you take the more the Landlord is using it as a safety net against a future occurence and the more likely it is to be a deposit.

Why does anyone ever need even a full month's rent as a holding fee, never mind even more?

Reply to the comment left by "Industry Observer " at "06/03/2014 - 16:46":

A holding fee must surely cover the potential downside risk to the landlord? Therefore, if a landlord is being asked to hold a property for 6 weeks, the holding fee should be six weeks, otherwise, if the tenant pays less and back out the day he's due to sign the tenancy and move before the landlord would be out of pocket.
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Reply to the comment left by "Industry Observer " at "06/03/2014 - 16:46":

The landlord is perfectly allowed to take a deposit as a "safety net against a future occurence".
What the landlord probably does not want is to take a _tenancy_ deposit as defined in the Housing Act because (a) it implies that there is a contract to create a tenancy, and (b) tenancy dosit protection rules kick in.

Names and amounts do not matter, it is the intent and purpose that do.

Mark

You are looking at this the wrong way round, wrong end of the telescope.

The law in this connection is consumer law and yes the Landlord is a consumer but he isn't the one that gets the protection.

Remember too that if you take this money, treat it as a holding or reservation fee (never use the D word) and so do not protect it and then, 6 weeks later keep it in lieu of rent what have you been holding all the time?

Money held in contemplation of the discharge of a future obligation on the part of the tenant, in this case the intended tenant.

A Deposit but you diodn't protect it..............!!!

Remember any tenant paying the actual pukka deposit in advance isn't actually a tenant until he signs (though don't lose sight of the importance of clause 45 in the 88 Act)

“tenancy” includes a sub-tenancy and an agreement for a tenancy or sub-tenancy; and

The D word has nothing to do with it, if there is no tenancy it is not a tenancy deposit - SIMPLES !!!

If whatever you want to call the up-front-payment is later used as a deposit (i.e. when landlord and tenant sign the AST) then a landlord has 30 days to protect the deposit from that date.

I really don't see why people get so confused about this.

That said, I have never taken money up front, I prefer the method which I suggested in the first reply comment of this thread.
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