Does holding deposit start 30 day deposit clock?

Does holding deposit start 30 day deposit clock?

by Readers Question

Guest Author

9:05 AM, 18th June 2024, About 2 weeks ago 3

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Protecting a deposit in real life, is not something most legal professionals would have likely ever done. Their interpretation of the law, must therefore sometimes be questioned. I have been advised by two experienced lawyers, that “all deposits must be protected within 30 days of receipt”. As a landlord, I cannot agree with such a simplistic conclusion.

Say a (holding) deposit is received 45 days before an AST is actually signed. That holding money would legally become an AST deposit, only on the 46th day when the AST is signed. No contract could have materialised and the deposit refundable.

No money could therefore have been protected within 30 days of initial receipt, because it would have still been a holding deposit at that time. There was no tenant within 30 days of receipt of the money. The 30 day clock can only start and a deposit can only be registered online, after there is a signed AST, with a landlord, a tenant, a tenant deposit, (not mere holding), a start date, an end date, agreed rent, etc.

None of above would have been legally available until the AST was actually signed, 46 days after the initial funds were received.

My solicitor and barrister insist that all deposits must be protected within 30 days of initial receipt, but does not make sense in this instance.

Anyone aware of any case law, or ruling?

Teddy


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Comments

Cider Drinker

9:22 AM, 18th June 2024, About 2 weeks ago

Holding deposit and tenancy deposits are two separate entities.
There is no need to protect a holding deposit. The holding deposit is capped at one week’s rent (Tenant Fees Act).

Julesgflawyer

11:03 AM, 18th June 2024, About 2 weeks ago

As Cider Drinker says, they are different things. The requirements relating to "tenancy deposits" are in section 213 Housing Act 2004, specifically ss213(3) and 213(6).

"Tenancy deposit" for these purposes is defined in s212(8) as "... any money intended to be held (by the landlord or otherwise) as security for - (a) the performance of any obligations of the tenant, or (b) the discharge of any liability of his."

So a holding deposit is clearly not a "tenancy deposit".

PS I'm a lawyer and a landlord.

Julie Ford

8:08 AM, 20th June 2024, About 2 weeks ago

It’s rather concerning both your solicitor and barrister have such a lack of understanding of the law
Holding deposit (HD) this is 1weeks rent taken to secure the property while references are being done
You can only hold the HD for 14 days (Tenant fees act 2019) by which time a tenancy should have been entered into, if the process is going to take longer, you need written permission from the applicant to hold the HD for longer
Once the tenancy is due to commence the HD is normally added to Rent due, reducing the first months rent owed by 1 week, the HD is not usually apportioned to the security deposit, which would then be due in full
Security deposit (SD)
The 30 day clock to protect only start once you RECIEVED the SD
Which will normally be a few days before the tenancy starts
As has already been said the HD and SD are two separate payments governed by two separate pieces of legislation
Your legal team may want to embark on a refresher course

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