Holdng Deposit Receipt

kmmr

Hi,

I was wondering if anyone here knew what to include on a reciept for a holding deposit.

If the tenant fails the credit check, or pulls out, then I think the holding deposit should be retained, but if the landlord pulls out because of 'change of mind' then the tenant would get it back.

I have a slightly flaky tenant just starting referencing, and I have a feeling she may change her mind through the process.. so I'd like a little certainty. The deposit isn't huge (1 week, which is about the time it would take me to find another tenant) but I want to make sure the receipt is clear and fair.

thanks in advance!

kmmr

DannyboyMidlands

kmmr wrote: »

If the tenant fails the credit check, or pulls out, then I think the holding deposit should be retained, but if the landlord pulls out because of 'change of mind' then the tenant would get it back.

So it's heads you win, tails they lose?

In the nicest possible way, I'd tell you to shove it.

kmmr

How is that the case? I am not trying to be unfair.

If they pass the credit test (which they know about) and go ahead, then the holding deposit is used as part of the main deposit.

If they fail the test, or just change their mind, then the holding deposit is retained by the LL.

If I decide (for any reason) I don't want to go ahead, then I will give back the deposit. For example, if they pass the referencing, but I change my my for any reason, then I give back the money.

kmmr

p.s. I can't really imagine why I would change my mind. If they pass the referencing then all is fine, I just get the feeling they are applying for a number of flats. If they get another one they prefer, then they have wasted my time (which is perfectly within their rights) but isn't that what a holding deposit is for?

DannyboyMidlands

And if you pull out, you have wasted their time. Penalties for them pulling out but not you. The definition of unfair, no?

If you can change your mind on a whim, what is this holding deposit actually holding?

Personally I wouldn't pay it and find somewhere else to rent if need be.

tbs624

You say that *you* would "like a little certainty" but what is it that you are offering the T in return for the payment of this holding deposit?

Has the T seen a copy of the tenancy agreement?

If the potential T "failed" your referencing procedures it would not be appropriate for you to hold onto the deposit in full - just a proportion that covered the actual costs incurred by you. Are they also paying a fee to cover the third party checks?

jjlandlord

I don't see how it could be fair that they lose their deposit because you decide not to rent to them ("failing" credit check/referencing just means that you decided not to rent based on this information).

Holding deposit: Means that they put down a deposit to show that they are serious so that you hold the property.

See this informative discussion:
http://www.landlordzone.co.uk/forums/showthread.php?13840-Deposits-not-held-for-security

To quote:

Holding deposit

The intention here is that the tenant pays over a sum on the understanding that the property is not offered elsewhere. If it is declared to be non-refundable then there has to be an obligation on the part of the landlord. It is, I suspect, rarely set out clearly what that obligation is. If the arrangement is vague there is no contract and the deposit will be refundable. If the arrangement is not vague then what we have is effectively an option for the tenant to take the tenancy. If it is an option for the tenant to take a tenancy, then that presents difficulties for the landlord if he has not set out clearly what conditions are to be fulfilled before the option can be exercised. The drafting of options is best left to experienced conveyancers.

kmmr

Thank llz - that's exactly what I am after. I am happy to take on whatever obligations seem appropriate (I probably shouldn't have mentioned changing my mind, I have absolutely no intention of doing that, it's a standard rental) I just wanted to see if there was a standard form.

"Holding deposit

The intention here is that the tenant pays over a sum on the understanding that the property is not offered elsewhere."
Agreed. Which is what I am doing (I have turned down other applicants)

"If it is declared to be non-refundable then there has to be an obligation on the part of the landlord. It is, I suspect, rarely set out clearly what that obligation is. If the arrangement is vague there is no contract and the deposit will be refundable. If the arrangement is not vague then what we have is effectively an option for the tenant to take the tenancy. "
Which is what I was trying to address.

If it is an option for the tenant to take a tenancy, then that presents difficulties for the landlord if he has not set out clearly what conditions are to be fulfilled before the option can be exercised. The drafting of options is best left to experienced conveyancers.
so is the answer just forget holding deposits? LL takes the risk.

As it happens, after a day of saying - yes, absolutely, please hold the flat and turn down all other applicants, the potential tenant has pulled out. So at least my instincts were right! No deposit was recieved, and to be fair no loss as one of the others is happy to take it.

kmmr

tbs624 wrote: »

You say that *you* would "like a little certainty" but what is it that you are offering the T in return for the payment of this holding deposit?

I'm holding the flat for them, ie not showing anyone else, or going through the process of checking references for anyone else.

Has the T seen a copy of the tenancy agreement?

No. Fair point - I could send them it though.

If the potential T "failed" your referencing procedures it would not be appropriate for you to hold onto the deposit in full - just a proportion that covered the actual costs incurred by you. Are they also paying a fee to cover the third party checks?

I agree it's only fair to retain the actual loss.

The questions of 'failure' is interesting though. I could ask by email
- are you ok with a credit check. Do you have any defaults of judgements I should be aware of?
- are you ok with me speaking to your previous landlords. Are there any issues I should be aware of?

If I send the lease, along with those questions, does that seem more appropriate?

I sense this is a minefield, and the slightly emotive responses make that clear! Perhaps holding deposits are just in the too hard basket.

In reality I would almost always give it back if they asked (I don't like conflict) but if there is no commitment required by the tenant, they would just apply to multiple flats.

DannyboyMidlands

I think that you need to be very carefull when charging random fees for this, that and the other.

The unintended consequence may be that you weed out all the respectable tenants (who won't pay them) and are only left with divvies who couldn't manage their way out of a paper bag, let alone their finances.

jjlandlord

You can charge prospective tenants separately to cover your costs re. referencing so that you can refund the deposit if you are not satisfied without direct financial risk.

Re. holding deposit being non-refundable if prospective tenant backs out, imo you obligation should be:
- to take property off market for a set duration,
- to rent property to them if they pass your referencing procedure. Criteria to be fulfilled should be clearly listed and explain.
- to list at that point any other conditions of the tenancy (e.g. no pets, break clauses, etc.)

Of course, as mentioned in above quotation "The drafting of options is best left to experienced conveyancers. "
So best option would be to ask a solicitor to draft your template.

If you do all that I reckon you'll be up for an award as better 90% of all letting agents.