Is it lawful for agent to retain deposit one day after reserving house?

Sorry, but it seems clear to me that you have lost the deposit. As landlords we would refund it in those circumstances, but the landlord or agent isn't obliged to at all... You could try and persuade them/appeal to their better nature, but I fear you have no power to get it back. All the best.

According to the wording on the invoice it sounds like a prospective tenant could hand over £500, not get the property through no fault of their own and then lose the £500.

Sounds a nice little money spinner to me. I wonder why agents are held in such high esteem?

Mercy,

This is a try on. They cannot withhold your deposit. I assume you are in England, as the law in Scotland is different. A landlord or agent can put what they like on a piece of paper but the law is clear. The right to withhold money from your deposit is only to cover their reasonable costs. And reasonable does not in law cover loss of rent. (On that point I am willing to be corrected - but I understand it is very difficult to prove 'loss').

I suggest you tell the agent in writing that you want your money back. Tell them they are breaking the law and you will contact Shelter, trading standards in the Council. etc

This kind of action by agents brings good landlords and good agents into disrepute. Mark you should name and shame - if the facts are correct.

I suspect that this is one of the times where asking Shelter to act for you may be of benefit. As a general rule, you should always read anything provided as T&Cs or a contract very carefully before you sign up and/or hand over money. At first sight your money is long gone. Pressure from a third party, (like Shelter), may help, or reference to the Unfair Contracts Terms Act via the Duty Officer at the local Trading Standards office.

It seems clear to me that this comes under the Unfair Terms in Consumer Contracts Regulations 1999.
The Citizen's Advice website includes the example of "a term which tries to make you pay more than is needed to cover the trader's losses if you cancel the contract".
I would suggest a letter giving them 7 days to return the money, then fax them a completed Claim Form downloadable from https://www.gov.uk/make-court-claim-for-money
If that doesn't have the desired effect then make the claim online as the court fees will be less.

Are you talking about a "holding deposit" for the agent to stop marketing a property as you want it so badly you are willing to put your money where your mouth is ?

or

A deposit which is normally given to the agent or landlord once the tenancy has been signed - this deposit has to be lodged with a Deposit Scheme.

Different laws apply to these 2 types of deposit.

If its the first, I would have given you back the money - but depending on the agent's terms and conditions which you should have been shown - you may have lost it.

I adopt the view that if a l/l or agent has incurred costs due to a prospective tenant's change of mind then the prospective tenant should compensate the l/l /agent for that loss.

If the l/l were to say no - for no good reason - then the prospective tenant should be reimbursed.

Clearly the deposit, less any actual losses must be returned!

The Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999 will have the effect of making unreasonable contractual terms unenforceable. The Unfair Terms in Consumer Contracts Regulations 1999 apply where the tenant is a private consumer and stipulate that any standard term must be fair, used in good faith and written in plain English. The Office of Fair Trading Guidance on unfair terms in tenancy agreements (September 2005) explains how some contract terms in tenancy agreements could fall foul of the Unfair Terms in Consumer Contracts Regulations 1999.

i find it surprising how many experienced landlords dont seem to understand their basic legal obligations.

All,

As I said previously I am not a lawyer but I have learnt a lot from working very closely with lawyers from two of the top 10 largest companies in UK. I had the misfortune to have to represent these two companies in a legal contract dispute negotiation (Circa £10 million) and this is what I was told by said company lawyers: You can draw up anything you want on a piece of paper and have it signed but a clause which has a penalty which does not represent the actual damage caused by a defaulter is worthless. It is a fundamental principle of English law that the penalty cannot exceed the damage. Thus if a prospective tenant pays £5000 as a holding deposit it is very unlikely that money could be held if the damage was less than £5000. And it is up to the deposit holder to prove loss. Now the next point is loss of rent is very difficult to prove. If the property is vacant for a month longer as a result of the prospective tenant withdrawing is that a loss of one months rent or a deferral of one months rent? The value of each case is different. And finally the next principle of English law is that all parties must act reasonable to mitigate the loss.
Bottomline there is a lot about this issue on Shelter's website and on the OFT website (or their current equivalent)

I am not a lawyer. All in my humble opinion.

Reply to the comment left by "Mike W" at "06/12/2014 - 10:43":

im not a lawyer either, but do have some legal training. agreed penalty clauses are unenforceable (unless its a parking ticket!).