The Holding Deposit
The holding deposit shows good faith on the part of a prospective tenant enabling the landlord to take further action in the confident knowledge that the applicant is serious and fully committed to the property:
Cancel any advertising for the letting
Tell other applicants that the tenancy has been taken therefore avoiding "stringing them along for too long", though you should continue to take details just in case
Prepare a letting agreement
Take up references
Carry out credit checks (some landlords make a charge for this - administration fee, agents almost always do).
The holding deposit is particularly appropriate where there is good demand for the property and the landlord may lose other prospective tenants if the applicant causes unnecessary delay or declines the tenancy at the last minute.
In the event of the tenancy agreement falling through the landlord may well decide to keep this holding deposit as recompense for the inconvenience and cost caused, but this should be pointed out and stated in writing to any prospective tenant at the outset, along with a written receipt for the deposit held - you need a holding deposit agreement - see Holding Deposit Agreement - Free dowload.
The amount of any holding deposit should therefore reflect in advance the reasonable or approximate amount of the landlord's loss in the event of non-completion of the agreement.
Once the agreement is signed the holding deposit would normally then form a part of the Security Deposit, to be held by the landlord or the agent throughout the term of the tenancy. If you decide not to take a Security Deposit, the holding deposit should be returned.
An Administration Fee of £ [ ] will be required for this tenancy.
A Holding Deposit of £ [ ]
Amount in words:
is being taken for which this document represents a receipt.
• The property will be suspended from the letting market in favour of this
prospective tenant and held for a maximum period of [ ] days.
• If the prospective tenant fails to progress the tenancy for any reason the holding
deposit will not be refunded.
• The holding deposit will be credited to the damage deposit/bond or rent on
completion of the letting agreement.
“Where the tenancy does not go ahead because the landlord or agent decides not to proceed, whether this is on the basis of a failed reference check or not, then we take the view that they are not entitled to charge the tenant for the costs they have incurred because it is the landlord/agent who has breached the agreement, not the tenant. If a tenant puts down a holding deposit, provides accurate information about themselves and does not withdraw from the agreement, we see no justification for the landlord/agent seeking to keep any of the tenant's monies on the basis that the landlord/agent decides not to proceed with the tenancy.”
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