Top Tips for First-Time Renters in London: A Tricky Holding Deposit
Competition among tenants is getting higher in London these days. Thus, finding a property to rent can be a pressured situation, especially if you know others are also interested. Many people are so afraid that the flat they have found and liked so much would go to some other tenants, that they decide to reserve the property with a landlord or a letting agent for the period their references are being checked. In this case, the prospective tenants are charged a so-called holding deposit, which should not be confused with a security (tenancy) deposit. The latter is paid as a security measure in the event you should damage the property or fail to pay rent. Usually, a holding deposit is set against a security deposit, or is refunded when you move in. If the agreement is cancelled, and it’s not your fault, the holding deposit must be returned to you. However, while security deposits are protected by the deposit protection scheme, and you most likely will get it back when you move out, the situation with the holding deposit is quite tricky with disputes that may end in courts. To avoid this, see below our list of ‘tricks’ when tenants may lose their money.
Trick #1. Ambiguously ‘off the market’
A holding deposit is paid when you want the landlord or agent to place a hold on the property being shown to other prospective tenants while you go through the referencing process. Paying a holding deposit means that you are committed to renting the property, and the landlord is committed to holding the flat off the market and renting the property to you, if you go through all checks successfully. We strongly advise you to check whether the flat is really ‘off the market’. If the property is being advertised by one agent and is still being marketed after you have paid the holding deposit, you should raise this matter directly with your letting agent, because you may have grounds for a complaint.
Trick #2. A verbal agreement
Any verbal agreements are not reliable and may lead to further miscommunication, and does not ensure that the letting agent will safeguard your deposit. Written confirmation makes it easier to complain in case the agent breaks your agreement. Thus, to be on the safe side, you should always ask your letting agent to confirm to you in writing: • the amount of the holding deposit • if it will be used towards your security deposit or rent • if any amount goes towards any fees • if the landlord changes his mind, will the deposit be returned to you • in what circumstances the holding deposit is non-refunded.
Trick #3. The small print
Estate agents often propose to tenants to sign a short, normally 3-page contract specifically on the holding deposit. Check this document thoroughly, especially the small print of the contract, because, as they say, “devil is in the detail”. If you were given a contract saying the deposit was non-refundable, this may be an unfair term, depending on how it was worded in the contract. You may be able to challenge this. Also, check thoroughly which documents you will have to provide for the reference check, especially if you are non-resident. For example, you will most probably be asked to provide a document on your annual Tax Return, so make sure that you have this document, otherwise the landlord may refuse you and you might have trouble to get your holding deposit back from the estate agents. Unfortunately, some estate agents represent interests of landlords rather than tenants on the other side. This is not the case with Ready Property International estate professionals, who always fight for the interests of our clients.
If you change your mind…
Getting all of your holding deposit back will be very difficult, if you decide you no longer want to rent the flat, and this will be fair. Isn't the point of giving a landlord money to "hold" an apartment for you so that the landlord has incentive to not rent to someone else? If the landlord has to give the money back when you change your mind, how is that incentive? That is why you should expect to give up at least some of that. Thus, it is essential to establish what terms and conditions apply should you withdraw your application for the tenancy. Generally, if you are not sure about the rental, it is better not to pay any holding deposits, only security deposits with a signed lease and a clear document outlining both your responsibilities and the landlord's.