Holding Fee kept unfairly?

[DampandDusty]

My 2nd ever posting:

 

Along similar lines, I have a friend who was showing an interest to the lettings department of an Estate Agent in a property.

 

My friend handed over credit card details to the agent. His understanding was that a holding fee of £175.00 would be taken from the card once an application form for the property had been physically handed in to the agent.

 

The agents understanding was that the fee would be deducted immediately, clearly, since that is what they did.

 

In the meantime, my friend found a property to let that he liked much better and asked that his interest be withdrawn. No paper application was made, therefore no credit/reference checks or other admin was done.

 

The agent is keeping the £175 on the grounds that they alledge they held the property for my friend, when it could have been on the open market. He thinks that he didn't actually make an application and that his deposit should be returned, as the agent has engaged in some sharp practice.

 

Who is right?

[Esio Trot]

Difficult to answer really.

 

In our office, if someone was "showing and interest" in a property, they would normally be told that unless and until monies were paid, the property would stay on the market.

 

Once reservation/holding monies were paid, they are given terms of business plus an example of the TA they will be signing plus the referencing forms. The property is then tagged as "let agreed" on all advertising, and viewings are cancelled/ceased.

 

The Terms of Business state that the property is reserved for them, and that to withdraw without good reason will result in the forfeit of their money. From a landlords point of view, for someone to withdraw will cost time and money, so some recompense would be expected.

 

They need to look at their documentation to see what they signed up to.

[DampandDusty]

I have asked and no written Terms of Business were ever issued. My friend has never had sight of any terms of business.

 

What is the actual legal standpoint on this situation?

[Planner]

If the fee was paid by credit card, which I gather it was, then the card company is also jointly liable. I would give them a ring and make them aware thats its a disputed transaction as the money was taken prematurly and before any service was provided (and ultimatley no service is provided!), the agents are being uncoorporative, and you want it back.

[DampandDusty]

Hello Planner and thank you for your help.

 

Funnily enough, I have today spoken to the Credit Card company and they say that since I gave out my details to the agent over the phone, this is tantermount to authorising a transaction.

 

I'm not at all sure that is the case - they advised me to look at the Consumer Credit Act or consult Trading Standards. I think they are giving me the brush

off, as are the agents.

 

As usual in this day and age, no one wants to take responsibility. Good grief, I sound like a Grumpy Old Man...

[Esio Trot]

Funnily enough, I have today spoken to the Credit Card company and they say that since I gave out my details to the agent over the phone, this is tantermount to authorising a transaction.

 

This is firstly different to your first post in this thread where you wrote:

My friend handed over credit card details to the agent.

Was it you or your friend?

 

Secondly, you now give extra information, vis, you made the reservation by means of a phone call.

 

I think in these circumstances, the agent is right to hold on to the money.

[DampandDusty]

Hello Esio Trot.

 

This what you get for you and your partner using your computer.

 

The circumstances remain the same, though.

 

Surely giving your CC details thinking that it faciliates easy payment in the future does not mean that a payment can be taken automatically - I thought that the payment would be taken once an application form was actually submitted?

 

Seems like an easy way to make some money to me. Granted there seems to be some level of misunderstanding and lack of communication involved with the agent.

 

You state that "They need to look at their documentation to see what they signed up to." - no documentation was ever seen or signed. Does this mean a contract was actually entered into?

[Esio Trot]

My reply was on the presumption that your friend physically reserved the property on the agent premises. The paperwork involved normally (or should with any reputable agent) gives both parties clear procedures.

 

As it was done over the phone, that is a completely different ball game. In English law, there can be verbal contracts. Even a tenancy can be just verbal, with no written agreement.

 

Surely giving your CC details thinking that it facilitates easy payment in the future does not mean that a payment can be taken automatically - I thought that the payment would be taken once an application form was actually submitted?

No agent who wants to be successful will stop advertising a property, or stop viewings, until someone puts money down. It may surprise you to know that a number of potential tenants run with two properties, paying reference fees on both (on the basis that they still have one if the other falls through for any reason - losing £200 is small beer to many). Also at least once a month we get a phone call from someone who has viewed, saying can we hold it until that evening, or first thing next morning when they can put money down. That is the last we hear of them. We are considering taking card payments: likewise in principle it will not be refundable. However, like all things in life, we will consider part refunds - especially where little time is involved.

 

I think you will be unsuccessful in trying to get a full refund. However, it would be worth writing to the agent acknowledging that they have been put to some expense, and asking for £x portion to be refunded.

 

Also, find out if they are in NALS, ARLA etc. If so, then they will have a written complaints procedure. As well as asking for a portion to be refunded, you at the same time could ask for a copy of their complaints procedure.

[DampandDusty]

Thank you Esio Trot. All good solid advice.

 

Wouldn't a verbal contract be very difficult to prove either way - surely it's just a case of one person's word against another from a probably unrecorded phone call?

 

Yes, the agents in question are members of NAEA, ARLS and NALS.

 

I presume these 3 organisations have formal complaints procedures?

 

I will look into it.

 

Thank you again.

[wrongrighter]

What is a "holding fee" when its at home?

 

This might breach Section 1 of the Accommodation agencies Act 1953 which says:

 

"1.

Illegal commissions and advertisements.

— (1) Subject to the provisions of this section, any person who, . . . F1 —

(a)

demands or accepts payment of any sum of money in consideration of registering, or undertaking to register, the name or requirements of any person seeking the tenancy of a house;

 

(b)

demands or accepts payment of any sum of money in consideration of supplying, or undertaking to supply, to any person addresses or other particulars of houses to let; or

 

©

issues any advertisement, list or other document describing any house as being to let without the authority of the owner of the house or his agent,

 

 

shall be guilty of an offence"

 

Good luck!

[Aequitas]

In the context of residential lettings, if the question is asked whether a "holding deposit" (whether expressed to be non-refundable or not) should be refunded, the question that first needs to be asked is whether there is a contract. If no contract can be found, then the deposit must be refunded.

 

It must be remembered that it takes two to make a contract - you cannot have a contract where only one party has obligations. So if a deposit is made to reserve a property it can be seen that the tenant has provided what could be consideration, but what has the landlord brought to the arrangement? If it is a promise not to let the property elsewhere then, well, he must not let the property elsewhere and is effectively committed to let to the tenant come what may - whether it be a better offer or even bad references. In practice what is promised is never spelled out - there is just a vague understanding that the property will not be advertised. I think that in most cases it is going to be difficult to find a contract.

 

If we go further and ask who is to keep the deposit and find that it is the agent for his time and trouble, then we have to ask whether there is a contract with the agent and if so what it is that the agent is agreeing to do. Indeed, I think we should express surprise if we do find a contract since an agent has no business entering into a contract with a tenant when he acts for a landlord - there has to be a potential conflict of interest.

[bedlington83]

Indeed, I think we should express surprise if we do find a contract since an agent has no business entering into a contract with a tenant when he acts for a landlord - there has to be a potential conflict of interest.

Quite. So how come they all get away with charging tenants an "admin" fee?

[ladylady]

my daughter just handed over £200 holding fee for a property she saw this morning agreeing she could go in on 19th february. she signed an agreement with the agent..the agent just rang to say she could not have the property on that date as the landlord wants someone in before that. what was the point of a holding fee? the estate agent says they have someone who wants it sooner and take it when she says or leave it. i hope they are not going to try to hold on to the fee as well?

Edited January 18, 2010 by ladylady
missed a bit

[JimmySpangle]

If she signed an agreement in so much as an assured shorthold tenancy agreement, then the agent cannot back out and your daughter moves in on 19th whether they like it or not.

[Steve__M]

What did it say in the signed agreement?

[mbike]

We have just finished a six-month tenancy and are in the process of getting back our 2-month deposit, which the landlord lodged with the DPS. However, when we were first looking at the property with his mother, we decided there and then to take it and gave her a holding deposit of 1 weeks rent while we got our references etc into place. When we picked up the keys after successfully completing all are reference checks, guarantor forms etc, we asked the landlord if they were going to incorporate the holding deposit into the first months rent. The son - who looks after the property via a holding company for his mother said the money was non-refundable and was effectively an arrangement fee for holding the property for a week while we sorted out references. We left it at that but feel this is not right and don't want to just give away what is basically quite a large sum of money.

 

As it was us who suggested the deposit as a gesture of goodwill - based on the understanding that it would be refunded - what are our rights. His mother signed a receipt for the money on the day we gave it to her.

 

Mike

Edited January 24, 2011 by mbike
typos

[Stepram]

the following is pinched from the pkc.gov.uk

 

Holding Deposits

 

If you are interested in renting a particular property from a landlord or letting agent, you may be asked to pay a holding deposit to secure the property if it is not immediately available. The holding deposit is usually a nominal amount and should be deducted from either the security deposit or the first month's rent that will be payable when you move into the property.

 

It is fairly common for landlords and letting agents to request a holding deposit but this practice is arguably illegal as the holding deposit could be regarded as a 'premium'. Premiums are defined as any money which has to be paid additional to the rent in order to secure a property. Section 82 of the Rent (Scotland) Act 1984 and Section 88 of the Housing (Scotland) Act 1988 prohibit landlords and letting agents from requiring tenants or prospective tenants to pay premiums.

 

If however, you find yourself in a position where a landlord or letting agent asks you to pay a holding deposit and you are happy to do so in order to secure the property, you should consider the following points;

The landlord or agent should provide a written document or contract which explains what the holding deposit is for and any terms and conditions as appropriate. Landlords are not allowed to use unfair contract terms such as a statement that says that all of the holding deposit will be forfeited if the prospective tenant decides not to accept the tenancy.

You should avoid paying a holding deposit with cash - credit card or cheque is preferable. The landlord should provide a receipt, regardless of the payment method used.

If you have paid a holding deposit and subsequently decide not to take on the tenancy, the landlord is likely to try to retain your holding deposit to offset costs and losses. In most cases however, landlords can only legally retain an amount that is equivalent to the reasonable cost of re-advertising the property. Landlords cannot retain your holding deposit to offset rent loss whilst the property is empty.

If the landlord subsequently decides not to let the property to you for whatever reason then all of the holding deposit must be returned.

If the landlord has failed to get you to sign a contract which outlines the terms and conditions of the holding deposit, then there are no grounds for the retention of the holding deposit if either party changes their mind.

If the landlord changes any of the terms and conditions of the offer of tenancy after the holding deposit has been paid and you decline the tenancy in view of these changes, all of the holding deposit must be returned.

[mbike]

Thanks for the reply mate.

 

Our problem is the landlord was not party to the holding deposit. It was his mother who showed us round. Both are now denying any knowledge of the deposit which means we will need to go the whole sworn-affidavit/small claims court route to get it back.

 

Thanks anyway