The process of renting a property often involves the potential tenant leaving two types of deposit. The first is a holding deposit and the second is a security deposit. A holding deposit is paid by the tenant to reserve the property. Normally, if the landlord oulls out of the tenancy the holding deposit is refunded to the tenant.
The deposit made by the tenant acts a refundable down payment. The tenant makes the deposit to reserve the property before an official contract is signed by both parties. This way the landlord will hold the property for the tenant until the contract is signed.
A deposit is a refundable payment by the tenant to the landlord or his agent.
The landlord will keep the deposit whilst referencing checks are being carried. The landlord should not search for other tenants and should not accept deposits off of other potential tenants. The landlord or letting agentwilcy keep the tenants deposit while executing the referral checks they need.
Once the deposit is placed, three things can happen:
The tenant passes the reference checks. The agreement is drawn up. The tenancy is formed.
The tenancy doesn't run because the landlord cancels
The tenancy doesn't run because the tenant cancels.
It is important that the conditions of the terms are given in writing so that everyone knows what will happen in each of the three scenarios.
Landlords or letting agents should only hold the deposit for 15 days unless an additional period is agreed in writing. The landlord must accept or reject the request by the deadline. If the landlord does not confirm by the deadline they should return the deposit.
If the tenancy does not proceded because the tenant wi thdraws the landlord may have the right to keep part or all of the holding deposit. It will depend on the conditions of the terms. However, the landlord or agency should only keep enough of the deposit to cover their costs.
If the landlord decides not to take on the tenancy, even after the tenant has passed the verification checks, the landlord must return the deposit. A property can be advertised in multiple locations, which can result in double bookings. Therefore, tenants should check if the property is advertised elsewhere before agreeing to pay a deposit.
If the landlord is satisfied with the tenancy checks then its likely the tenancy will go ahead. When this happens the tenant will be entitles to their deposit returned. This may be in the form of cash return or into you account. But it is more common that the holding deposit will go towards the tenancy costs, such as rent.
How much does a Holding deposit cost?
Holding deposits made after June 1, 2019 shuold be a maximum 1 week rent. If multiple tenants are living in the property the deposit should be split fairly. The total deposit paid between all tenants should equal 1 week for the total property when combined.
If the landlord or letting agency violates the terms of the holding deposit, the tenant may take legal procedings for breach of contract.
If the landlord or landlord violates any of these terms and conditions, the tenant may assert a claim of breach of contract. If the tenant beleives the landlord is not acting fairly, the tenant can file a complaint. If the complaint is not handled satisfactorily the tenanct may refer the matter to a professional body.
When can a landlord keep a deposit?
The landlord can maintain the deposit in whole or in part if a tenant:
Provides false information that may affect the landlords decision when letting the property;
does not take all reasonable steps to form the rental agreement causing the tenancy to fall through;
If the landlord or agency does keep the holding deposit in whole or in part, they must explain in writing why they retained the holding deposit within 7 days. If the landlord does not inform the tenant within 7 days why they are retaining any of the deposit, then the tenant may be able to claim the deposit back.