Holding deposit contract: shouldn't it be clearer when I lose the money?

SouthLondonUser

I am having issues letting a property through an estate agency (a large one with a nationwide presence). Obviously they asked me to pay a holding deposit. Less obviously, they never sent any document or confirmation of any kind about the terms. So I sent a quick email saying that I will be making the payment on the understanding that the contract is £x per month for x months, that the landlord agrees to A B and C, that I will lose the deposit if I withdraw or have misrepresented my employment or financial situation, but NOT if the landlord changes his mind. I did it in writing because I wanted a written confirmation should I ever escalate a complaint to the Property Ombudsman.

The agency first comes back writing that I will lose the deposit if I fail the reference checks, then comes back with an actual contract, which has a clause saying I lose the money if I fail to meet the agency’s or the landlord’s criteria. Criteria is an undefined term in lower case.

Negotiating commercial contracts is a big part of my job, and there is no way in hell a businessman in their sane mind would ever agree to a penalty for failing to meet generic unspecified criteria of a third party! How on Earth is this allowed? Any lawyer who would allow a client to sign something like this would be in for some big trouble!

The current wording would basically allow the landlord to change his mind if he receives a higher offer, claiming that I fail to meet his criteria (I don't know, too many children, children too young, potentially unstable employer, or whatever). How can I know what their criteria are? I told the agent my situation. It's his job to tell me if I meet the criteria or not!

I have proposed the wording be changed to something like “if I withdraw or have misrepresented my citizenship status, financial or employment situation”. The branch has apparently forwarded this to their centralised “compliance”.

I know I am a pedantic pain in the *, but I have had terrible experiences with landlords and agencies (including having to sue one which stole my tenancy deposit, before the protection scheme)!

Is this common? Have there been rulings by the Property Ombudsman (which this agency is part of) on this? The agency will probably be thinking I am a pain because everyone else signs without reading and without complaining!

It's high time the sector became regulated!

letitbe90

If it helps, it is unlikely a landlord would turn away a tenant without good reason. They can do with the money!
The whole holding deposit thing is really just to avoid the amount of timewasters that exist.

SouthLondonUser

What if the agency continues to market the property, and someone new (or someone who viewed it in the past) offers a higher price? It can happen.

I appreciate that, realistically, the odds are low, but, still, they are not zero. Why should anyone agree to something which is financially suicidal just because realistically it's unlikely to happen?

My point is that my proposed wording gives them all the protection they need. I am fine with losing the money if I withdraw or if I have lied about my situation.

One more point: I am lucky enough that my financial situation can be defined comfortable with respect to the rental cost. But what about someone in a different situation? What if someone discloses all his debts, then the landlord changes his mind and decides that the prospective tenant is too indebted and he doesn't feel comfortable letting to him? This kind of wording is so unfair...

thelem

It's because of the balance of power between the landlord and the tenant. As you say, most tenants won't bother to read the terms too closely, and the agency probably isn't too bothered if they lose a handful of potential tenants over this.

Look at the costs and revenue for an agency too - having a property vacant for a month might cost the landlord a lot, but the cost to the agency might be comparable to the cost of running checks on a tenant who you or the landlord then decide to reject. If the agency do decide they want to reject you as a tenant they will have incurred costs in staff time and maybe third party services like credit reference checks. They either need to:
a) pay for those costs themselves
b) charge the landlord, which will hurt their relationship with the landlord
c) charge the tenant, who they probably don't want to deal with again anyway

pinklady21

Move to Scotland where landlord's or their agents can't charge a holding deposit.

G_M

You are absolutely right that

a) it should be clearer and
b) there should be some regulation governing how/when holding deposts can be retained or returned.


But there isn't (in Eng/Wales).

SouthLondonUser

Thelem, the key point in your sentence is the landlord :

the cost to the agency might be comparable to the cost of running checks on a tenant who you or the landlord then decide to reject

I am totally fine with losing my deposit if I withdraw. That's what the deposit is for. I am not fine with losing it if the landlord changes his mind. That's the whole issue. If the landlord changes his mind it will be a cost to the agent, but that's not (should not be) my problem!

saajan_12

SouthLondonUser wrote: »

How can I know what their criteria are? I told the agent my situation. It's his job to tell me if I meet the criteria or not! - no, the agent works for the LL. Its his job to get suitable tenants and not waste the LL's time/money checking tenants who don't fit the bill. The agent doesn't owe you anything; if you don't like it you can vote with your feet.

I have proposed the wording be changed to something like !!!8220;if I withdraw or have misrepresented my citizenship status, financial or employment situation!!!8221;.

Your wording wouldn't work, because
1) its not just whether you misrepresent your status - reference checks / bank statements could uncover late rent payments, concerning landlord reference, more expenses than income, CCJs, not so permanent job contract, an unpaid debt you forgot about etc etc.. You may not have been lying but the checks may reveal concerning things that you / LL couldn't have thought of.. its close to impossible to write an exhaustive 'criteria' list.

2) If you want to withdraw, you can stop responding / being forthcoming with references, to force the LL to wait until the last minute or withdraw and so be liable to return your holding deposit under your wording

SouthLondonUser wrote: »

I appreciate that, realistically, the odds are low, but, still, they are not zero. Why should anyone agree to something which is financially suicidal just because realistically it's unlikely to happen?

Thats the point, a nominal holding deposit is not financially suicidal, its a small fee for the LL taking the time & cost of reference checks etc. So the small fee coupled with the low probability of LL withdrawing may be worth taking a chance.

Of course it coudl work the other way with LL's taking a chance and hoping tenants don't change their mind but
a) supply and demand - as long as there are more tenants looking for properties, LL's will be able to dictate terms. Its a free market: don't like it, then walk away.

b) Tenants choosing a property is very subjective - they could see and set their heart on another property, making them more likely to want to jump ship. LL's choosing a property is more a business decision - any tenant offering the asking rent and with good references will do.. there's little point in switching to someone else with a slightly better history last minute.

wesleyad

SouthLondonUser wrote: »

Thelem, the key point in your sentence is the landlord :

I am totally fine with losing my deposit if I withdraw. That's what the deposit is for. I am not fine with losing it if the landlord changes his mind. That's the whole issue. If the landlord changes his mind it will be a cost to the agent, but that's not (should not be) my problem!

It also makes you wonder, what's to stop them taking holding deposits from multiple parties and then rejecting all but one? I've heard of holding deposits being as much as £500 so that would be a nice earner! Just mark it down to yet another way agents in England can screw you over as they please.

SouthLondonUser

@saajan_12,

Of course the agent works for the landlord. My point is that, if I accurately tell him what my situation is, he should tell me whether I meet the landlord’s criteria or not. Expecting me to lose my deposit because my situation doesn’t meet his “criteria”, even if I had represented my situation correctly from the beginning, is ridiculously unfair. It gives the landlord a get-out-of-jail card to change his mind or accept a higher offer from someone else, and then claim that I didn’t meet whatever unspecified criteria he can come up with. That’s my point. I’m not asking for the landlord to pay me a penalty if he changes his mind – I’m simply asking not to lose my money! What an odd expectation, hu?

As for (1) what you say would be captured by my misrepresenting my situation. Why do you say otherwise? I’d add the misrepresentation should be material: if I have lied about a debt for which I have to pay 1/3 of my monthly income it’s one thing, but not disclosing that, I don’t know, I have a £500 credit card debt which I’ll clear at the end of the month because I always pay my credit card in full is quite different.


As for (2), my failing to respond would fall under failing to provide references.

As for your (b), I understand that the landlord is exposed to the risk of the tenant changing his mind – that’s why, again, I am totally fine with losing my deposit if I change my mind! You say that any tenant asking the offering rent and with good references will do for a landlord, but that is not true. Far from it. It doesn’t cover the fact that another tenant with equally good references may offer more and the landlord may accept it claiming some b* criterion is not met. Or that there are unreasonable landlords who change their minds capriciously.

“Financially suicidal” was maybe too strong a term, but, for a family home in London, a holding deposit of 2 weeks + reference checks + agency fees can easily be between £800 and £1400. Maybe not the difference between putting food on the table and going to a food bank, but peanuts it’s not.

The sector needs to be regulated because of the huge imbalance of power between parties. That’s also why I welcome the letting fee ban; yes, ultimately the fees will still be borne, however indirectly, by the tenants, but they will be negotiated by the landlords, who have more bargaining power.

Let me ask you this: do you ever negotiate business contracts for work? If you did, you would immediately realise why paying a penalty for failing to meet unspecified criteria which are beyond your control would be unthinkable, and any lawyer who advises you to sign something like would be sued for damages. In a business context. In the consumer world, anything goes, it seems...

letitbe90

SouthLondonUser wrote: »

What if the agency continues to market the property, and someone new (or someone who viewed it in the past) offers a higher price? It can happen.

I appreciate that, realistically, the odds are low, but, still, they are not zero. Why should anyone agree to something which is financially suicidal just because realistically it's unlikely to happen?

My point is that my proposed wording gives them all the protection they need. I am fine with losing the money if I withdraw or if I have lied about my situation.

One more point: I am lucky enough that my financial situation can be defined comfortable with respect to the rental cost. But what about someone in a different situation? What if someone discloses all his debts, then the landlord changes his mind and decides that the prospective tenant is too indebted and he doesn't feel comfortable letting to him? This kind of wording is so unfair...

The reason for there being no criteria is likely because the list is undefined and exhaustive. There could be a myriad of reasons one may have to refuse to give it, but they will all be valid but at the same time it is hard to list everything. Could be something dodgy shown on social media, may have been finding out you are part of some extreme right wing group, perhaps they have reason to believe you have rough friends who may stay over, perhaps they have heard you burnt down a previous house due to being careless, maybe they have in the process heard that your company is going down under - the list can go on - you can imagine how silly it would be to have to list every reason under the sun to refuse a tenant.