Housing Union: Holding deposits

Holding deposits

In summary:

Holding deposits shouldn’t be described as ‘deposits’ if the agency considers the fee you are paying to be non-refundable

Before paying a holding deposit, an agency should inform you ofthe checks they are going to carry out on you, the data sources they are going to use for this, and how much this will cost

Agencies should tell you what charges are going to be taken out of the deposit and when

They should also tell you whether or not the payment means that the property is taken off the market, and whether all or some of the deposit will be put toward future rental costs

If you can’t take a property before any charges have been taken from the deposit, you have a good case for getting all of it back

Agencies shouldn’t pressure you into paying holding deposits. This is what is called an ‘aggressive practice’

If the property is not ready on the date you were told it would be, you should be refunded your holding deposit

If the property does not conform to its description, or its condition does not comply with the requirements of housing legislation when you are due to move in, you should be refunded your holding deposit

If the landlord decides not to let the property to you because they decide your pre-tenancy checks are unsatisfactory, you should be refunded your holding deposit

What are holding deposits?

Agencies usually charge what they often call ‘holding deposits’ in order for a property to be taken off the rental market. The tenant pays an amount of money, and in return, the agency stops advertising the property. This does not mean that the property is now the tenant’s, but rather that the agency will begin the administrative process of setting up the tenancy. Often, this amount of money will be all or part of the fees the tenant is expected to pay for this administrative work. It may also include an amount that, assuming the tenancy goes ahead, is put toward the cost of the deposit or the cost of the first month’s rent.

Agency fees are governed by the Consumer Rights Act 2015, as well as by guidance from the Competition and Markets Authority, which is a government department that issues information on the enforcement of legislation such as the Consumer Rights Act. Before paying a holding deposit, an agency should give you information about the check they will carry out on you. This information should include ‘what criteria the check will assess, for example credit worthiness [and] unpaid judgements’, as well as ‘what data sources it will use, [and] what, if anything, it will cost’. Holding deposits also should not be described to you as ‘holding deposits’ if they are non-refundable, since the term ‘deposit’ implies that there are circumstances in which you have the right to a refund.

How can I get my holding deposit back if I can't move in?    

Various things can go wrong between paying a holding deposit and actually moving into a property. In the pressure of having to find a place to live, you might end up taking somewhere that either you or someone you’re going to live with hasn’t seen, and when you do, you might find that it’s not an appropriate place for you. Some agencies also change what is expected of a tenant during the administrative process, for example by demanding that each tenant’s guarantor (person legally responsible for paying your rent if you don’t) be liable for the entire rent of the property, and not just for your section of it, which they might not want to do or might not be able to afford. An agency might also change the start date of your tenancy, which can also cause problems for taking a property.

Agencies must tell you what charges are going to be taken out of the deposit and when. They also need to tell you: whether or not the payment means that the property is taken off the market, whether all or some of the deposit will be put toward future rental costs (e.g. rent), and the circumstances under which the deposit or part of it will not be refunded. If you decide that you don’t want to take a place before any of these charges have been taken from the deposit, you have a good case for getting the entire sum of money back.

Agencies shouldn’t pressure you into paying holding deposits, particularly by misleading you into thinking you have to decide early, or into thinking the property is about to be rented by someone else, when this is not in fact the case. This is what is called an ‘aggressive practice’. Again, if an agency does this and you then can’t take the property for whatever reason, you have a good case for getting your holding deposit back. You also have good grounds for getting the entirety of your holding deposit back if: the property is not ready on the date you were told it would be; if the property does not conform to its description, or its condition does not comply with the requirements of housing legislation when you are due to move in; and if the landlord decides not to let the property to you because the landlord decides your pre-tenancy checks are unsatisfactory.

Holding deposits can be expensive - usually hundreds of pounds. If you’ve paid yours and then you can’t move in, it can be a real problem, financially as well as in terms of the upheaval it causes. If this happens, agencies nearly always say that holding fees are non-refundable. This can make life really difficult - most of us don’t have another couple of hundred pounds available to secure a new place.

Template letter

If you find yourself in a position where you have paid a holding deposit on a property you can no longer move into, you can challenge the agency using information from the Consumer Rights Act and the Competition and Markets Authority. In the first instance, you may find the template letter in this link to be useful (click me!).

If the agency’s response to this letter is to insist on keeping your holding deposit, you might want to consider taking direct action. For more information on what that would mean