Question Re Holding Deposit

Anon_John

Hi I am a Newbie.

I read details on TPOS website. They state as follows:

" If you make an offer to rent a property the agent
may ask you to pay a holding deposit. This is not
the same as the tenancy deposit to cover any
damage to the property. The agent should inform
you in writing of the purpose of this holding
deposit and in particular the circumstances
under which it is repayable or forfeit."

and "If you ‘fail’ referencing you may
lose some or all of your holding deposit."

My question is: is the holding deposit for a whole month? If so, why would it cost one month's rent say £750 to fail referencing? Surely not?

I may be vulnerable because I am unemployed and do not have a guarantor and do not have a credit rating because I only use a debit card, never used a credit card and never been in debt. All I have to offer is large savings, so I can pay for 6 months or so upfront.

Do I risk losing my holding deposit?

Werdnal

Holding deposits vary from agent to agent, but usually not a month's rent. Possibly £300-£400 at a guess. Referencing/credit checks cost the agent (probably not as much as they charge the tenant, but thats life I guess), so they will want to cover these costs, and if you fail your checks, they do usually take some of the deposit to cover.

The holding deposit is literally to "hold" the property - reserve it if you like, whilst the checks are done to verify you as a tenant. They should not take any other enquiries for the property, or atleast if anyone else is interested, they should keep them as a 2nd choice tenant whilst your checks are done.

Also, if you change you mind, and decide not to take the property, the agent will want to retain some of the deposit to cover their costs to date.

Before you provide any sort of deposit, read the terms and conditions the agent gives you (or ask for them if they are not offered), and do not sign anything unless you are clear what it means. Also, get a receipt for any money you hand over.

The deposit you actually pay when signing up to rent is usually equal to a month's rent, sometimes up to 2 months. This is kept in a protection scheme on your behalf, and used to cover any damage/repairs/cleaning when you leave (or in some case cover missing rent if a tenant stops paying).

If you are in a position to pay 6 months up front, tell the agent/LL, as this will help re-assure them if your credit checks are not all they could be.

G_M

I was reading Werdnal's post and was about to hit "thanks" to indicate I agreed..... till the last paragraph!

Paying 6 months up front (apart from being beyond most tenants) should be seen as a last resort. An alternative when no LL or agent will otherwise rent to you. I would not raise or discuss this option unless forced to.

As well as the difficulty of finding this much cash, there are risks (small, but nonetheless there) in paying upfront.

Werdnal

G_M wrote: »

I was reading Werdnal's post and was about to hit "thanks" to indicate I agreed..... till the last paragraph!

Paying 6 months up front (apart from being beyond most tenants) should be seen as a last resort. An alternative when no LL or agent will otherwise rent to you. I would not raise or discuss this option unless forced to.

As well as the difficulty of finding this much cash, there are risks (small, but nonetheless there) in paying upfront.

GM, I take your point, but surely if OP is in a position to pay 6 months upfront (which they have already stated), then this would be preferable to losing possible rental opportunity if credit check fails. If checks fail with one agent/property, chances are it would fail on subsequent attempts.

Perhaps I should have phrased it that OP approach them with the 6 month offer IF the credit check raises concern, and not ahead of the decision.

If OP has no guarantor available, and no employer reference/proof of earnings, what would you suggest as an alternative?

G_M

Fair point!

Save money on the credit check which is not worth doing. Discuss with agent and if necessary offer 6 months.

But seriously check
a) landlord is the registered property owner (Land Registry here) and
b) if there's a mortgage on the property (again, see the Property Title as in a) that the LL has permission to rent (either a Buy-To-Let mortgage, or Consent To Let from the mortgage lender)

The risk is if the LL does not have permission, and falls behind on the mortgage, the mortgage lender can repossess the house and evict the tenant (who loses advance-paid rent).

Or if the agent goes bust it gets messy if the agent is holding the rent.

tbs624

Werdnal wrote: »

Holding deposits vary from agent to agent, but usually not a month's rent. Possibly £300-£400 at a guess. Referencing/credit checks cost the agent (probably not as much as they charge the tenant, but thats life I guess), so they will want to cover these costs.

It's possible to get to a fully signed up tenancy without using a "holding deposit" which gives no security to either side. Third party referencing checks cost between 15 and 50 quid (for an all singing all dancing one) and LAs tend to get a discount on those costs as regular bulk users of the service. They could quite simply ask the T to stump up those actual referencing fees, which is what most self managing LLs do. Most potential Ts don't hand over vast amounts of very personal data without being pretty serious about going ahead.

LAs are simply seeking to increase their cash flow at the tenant's expense.

Anon_John

Thanks Guys. Some very useful tips there.

One thing still confuses me. Are you saying that I should not offer the 6 months up front until after the credit checks are done? If I wait until afterwards, I will lose some of my deposit because I know the credit check will be negative. Surely better to offer in advance so that they do not do the credit checks. Surely if I pay up front, there will be no need of credit checks will there? Some advise says to check Land Registry re the Landlord. How long does it take to get the information? If I find property I like, I may lose out to someone else by the time I check out the LL. If I give a holding deposit, then discover the LL does not have permission from his lender, I will have to pull out which will mean losing my deposit. If I wait until I have the details I may lose the property. What should I do?

Btw, I have done some digging and discovered that SPICERHAART are enormous as a holding Company of Haart and Spicer McColl to name just 2 of many letting agents. They are members of TPOS.Based on the above advice a 6 month rent would surely be safer if held by a secure agency like them, wouldn't it? ie they are hardly likely to be closed down within the next 6 months. Would you advise that I use Haart and Spicer McColl for security reasons.

What I am looking for is a property in which the LL has permission to let and the agency is strong enough not to go bust. Which would mean I am covered on both fronts, ie if the LL is given the money I am protected, if the agency holds onto it, it will also be secure. Am I thinking right?

G_M

Anon_John wrote: »

Thanks Guys. Some very useful tips there.

One thing still confuses me. Are you saying that I should not offer the 6 months up front until after the credit checks are done? If I wait until afterwards, I will lose some of my deposit because I know the credit check will be negative.

?

My advice was

Save money on the credit check which is not worth doing. Discuss with agent and if necessary offer 6 months.....