Does landlord or agent keep the holding deposit if a tenant pulls out?

Does landlord or agent keep the holding deposit if a tenant pulls out?

8:43 AM, 4th February 2014, About 11 years ago 56

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Should a holding deposit be retained by the agent or the landlord?

A tenant paid my agent just under two weeks rent as a holding deposit, but a week later had to pull out due to personal circumstances. I told the agent I expected an amount equal to a weeks rent (being the amount lost due to the property being off the market). The agent agreed to pay me a little less than that, and I presumed that they had paid the remainder back to the person who backed out. Does landlord or agent keep the holding deposit if a tenant pulls out?

I was surprised to later discover that the agent retained the full amount, which seems unethical. I can understand them retaining an application fee, but not a holding deposit – after all it’s my property it is holding! I do not know if they charge a letting fee (nothing on the website) and I’ve not seen the terms of the holding deposit – it may say they will retain it in these circumstances. No mention of holding deposit in their terms with me. I would like to challenge this on principle, but I’m loathe to, as I’ve had a good working relationship with them up to now.

Any voices of experience or wisdom?

Thanks

John Frith


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Mark Alexander - Founder of Property118

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19:58 PM, 4th February 2014, About 11 years ago

Reply to the comment left by "Industry Observer " at "04/02/2014 - 19:45":

I thought you were out?

As you are still in I can confirm that my professional advisers recommended me to follow the guidelines issued by my|deposits from now on AND they also provided me with a solution to mitigate against any potential claims from tenants via assignment of their "chose in action" back to myself by way of deed and issued in conjunction with a new tenancy and Deed of assurance. It's a lot more complicated than that but I am not authorised or insured to share the professional advice given to me by my advisers any any further detail or to answer any further questions on their recommendations - sorry!.

Before anybody asks what a "chose in action" is, according to Wikipedia it is " A chose in action is essentially a right to sue. It is an intangible personal property right recognized and protected by the law, that has no existence apart from the recognition given by the law, and that confers no present possession of a tangible object" Please see >>> http://en.wikipedia.org/wiki/Chose

My final point is that there are several people who regret every type of investment or business decision, usually the ones who lose out. I suspect there are lots of ex-trainers who wished they have never gone into that business too LOL
.

Romain Garcin

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20:06 PM, 4th February 2014, About 11 years ago

Reply to the comment left by "Industry Observer " at "04/02/2014 - 19:45":

Well I think that professionals and deposit schemes legal teams were supposed to be among those who had read s.5! 😉

Re. holding deposits, what I'm saying (and you said earlier that you agreed, so I'm now a bit confused!) is that when one is paid it is not intended to be a tenancy deposit as per the very definition of what a tenancy deposit in HA 2004. As such deposit protection does not apply.

@IO: "“Agreement” in this context doesn’t mean the physical agreement itself and signing it – it means the intention to do so"

"agreement" means that the landlord agreed to grant a tenancy to prospective tenant. "agreement for a tenancy" is a rather clear wording IMHO.
Again, this is usually not the case when a holding deposit is paid: The landlord will usually only agree after references have been obtained and checks pasts.

As an aside, the definition of a tenancy deposit is based on the intention, not the name. If the intention does not match then it isn't a tenancy deposit, but if the intention matches then it is one, even if the word 'deposit' was not uttered.

Romain Garcin

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20:12 PM, 4th February 2014, About 11 years ago

Reply to the comment left by "Mark Alexander" at "04/02/2014 - 19:58":

This might work, but I would think that you should ensure that tenant has taken legal advice by way of a solicitor certificate, and Deed witnessed by their solicitor, otherwise that Deed might be wide open to legal challenge in the same way e.g. guaranteed are (IANAL).

John Frith

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21:03 PM, 4th February 2014, About 11 years ago

Reply to the comment left by "Mary Latham" at "04/02/2014 - 19:52":

OK Mary. That helps me understand.

John Frith

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12:06 PM, 5th February 2014, About 11 years ago

Reply to the comment left by "Mary Latham" at "04/02/2014 - 19:52":

Hi Mary. Have thought about this more.

What I am saying is that if you take the 1st months rent more than 30 days in advance of the rental payment becoming due (which you say is when the agreement is signed ), then according to section 213, this would need to be protected, and you could be fined 3 times the amount if it wasn't!

John Frith

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13:13 PM, 5th February 2014, About 11 years ago

The relevant legislation:

212 Tenancy deposit schemes

edit

(8)In this Chapter—

edit

“tenancy deposit”, in relation to a shorthold tenancy, means 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,

arising under or in connection with the tenancy.

Mary Latham

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13:12 PM, 6th February 2014, About 11 years ago

Reply to the comment left by "John Frith" at "05/02/2014 - 12:06":

John My tenancy agreement states that the first rent payment date is (xyz) the date that the agreement is signed in put in here and the following payment is due on day one month two of the tenancy and monthly thereafter.

John Frith

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20:21 PM, 6th February 2014, About 11 years ago

Reply to the comment left by "Mary Latham" at "06/02/2014 - 13:12":

I don't understand how what you have said addresses my point, but I'll leave it at that.

John Frith

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20:26 PM, 6th February 2014, About 11 years ago

Just in case it's helpful to anyone, I found support for the view that one can only retain money from a holding deposit to "off-set the landlord's reasonable costs incurred until the property is re-let." from the OFT:

See P83 of:
http://www.oft.gov.uk/shared_oft/reports/unfair_contract_terms/oft356.pdf

Fed Up Landlord

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20:34 PM, 8th February 2014, About 11 years ago

The previous thread and other discussions on Property 118 make a distinction between a deposit to secure a tenancy and a deposit as a result of obtaining that tenancy. I seem to recall a thread that as long as any holding deposit was made clear at the time that it was to secure the tenancy and was refundable then it did not fall foul of deposit protection rules.

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