deposit withheld by prospective landlord

[rennai]

Honourable Caggers,

 

Please I need help to recover rent deposit I paid on 01/02/14 to prospective landlord.

 

Details:

 

My partner and I planned to relocate to a new city, so I saw flat to let advert on gumtree when I visited my friend who lives in the city we intend moving to, I rang landlord to view flat but his dates for viewings weren't convenient to my schedules, so we arranged that my friend viewed this flat on my behalf. After viewing my friend said it was okay, so I paid deposit on said date; hoping/wishing to sign lease and pay rent when I move in at later date to be agreed. Said landlord to be sent me pictures of this flat on 10/02/14, upon seeing pictures we decided against leasing said flat because kitchen and bathroom/toilet were too small. I wrote flat owner on 19/02/14 stating politely that I'd be going ahead and that need deposit refunded.

 

Landlord replied he won't be refunding deposit that he turned away about 10 other possible tenants. Is he legally right to keep deposit money based on what he said and considering other circumstances narated in the foregoing.

 

Any advice, hints or suggestions will be highly appreciated.

 

Many thanks and high regards!

[stu007]

Hi rennai

 

Do you have a copy of the Gumtree Advertisement?

 

Did the Gumtree Advertisement mention a Deposit?

 

The response from the Landlord does it specifically state `Deposit`?

 

Are you sure this was a `Deposit` and not a `Holding Fee`?

 

These links may be of use:

 

https://www.gov.uk/private-renting

 

https://www.gov.uk/tenancy-deposit-protection/overview

 

Please be patient as I am sure other caggers will be along to give you advice

Edited February 20, 2014 by stu007

[mariner51]

So you paid money for flat, sight unseen by you nearly 3 wks ago, than changed yout mind? How much did you pay?

How was this money described? Holding deposit? Any Agreement signed of detaied receipt given?

What was the proposed commencement date for AST?

 

 

It would appear you entered a verbal agreement with LL for supply/occupancy from which you withdrew.

Whilst LL must mitigate his loss, he has a case IMO for re-advertising cost & poss 2 weeks loss of rent.

Others may disagree, but if he had said at last minute flat was not available, here is your money back, you would have had a claim for temp accom, poss a week ina budget hotel/B&B.

 

 

If you want your money back you will have to sue LL in SCC for its return IMO

[Steve__M]

In the past I, as a private landlord, have taken a "holding deposit" and provided in writing a statement that the deposit would not be returned if the prospective tenant withdrew.

 

I don't know the legalities but I don't think this is unreasonable. Therefore, I would expect any tenant to sue me for the money if I felt they'd messed me around. So I expect you will have to get the money by persuasion or by sueing.

 

I read a review from "The Property Ombudsman" - I don't know exactly who "The Property Ombudsman" is, but he seems to be relatively legitimate.

 

In one case, a tenant withdrew from a deal and requested return of the holding deposit on the basis that no written terms had been agreed. The ombudsman's view was that half the deposit should be returned as the tenant had equal responsibility for ensuring that an agreement was made. In this case the deposit was quite large.

[rennai]

Hi rennai

 

Do you have a copy of the Gumtree Advertisement?

 

Did the Gumtree Advertisement mention a Deposit?

 

The response from the Landlord does it specifically state `Deposit`?

 

Are you sure this was a `Deposit` and not a `Holding Fee`?

 

These links may be of use:

 

https://www.gov.uk/private-renting

 

https://www.gov.uk/tenancy-deposit-protection/overview

 

Please be patient as I am sure other caggers will be along to give you advice

 

 

Thanks for your reply stu007.

 

I've a printscreen copy of gumtree advertisement; he stated therein that tenant will pay 1 month rent and 1 month deposit. Rent is £400 and Deposit is £400.

 

I've never met the landlord in person, everything was done via telephone and e-mail. I paid £400 via internet banking transfer which I referenced as rent deposit. Landlord never mentioned holding deposit in all conversation and email correspondences we had.

 

As I haven't met the landlord or saw this property, I never signed any contract or lease agreement, and certainly didn't sign holding deposit agreement; I didn't even know that there are 2 types of deposit until today, In fact I just googled it! However we agreed verbally that I'll sign lease upon taking possession of flat.

 

The property is located in England whilst I live in Scotland; I see you also live in Scotland as well. If I eventually sue this landlord, can I raise the claim in Scottish court.

[rennai]

@ Steve_M

 

In my case there was no written statement about 'holding deposit' let alone the clause that it will not be returned if I withdrew. There is absolutely no agreement in fact there was no receipt or written confirmation of move in date.

 

 

 

In the past I, as a private landlord, have taken a "holding deposit" and provided in writing a statement that the deposit would not be returned if the prospective tenant withdrew.

 

I don't know the legalities but I don't think this is unreasonable. Therefore, I would expect any tenant to sue me for the money if I felt they'd messed me around. So I expect you will have to get the money by persuasion or by sueing.

 

I read a review from "The Property Ombudsman" - I don't know exactly who "The Property Ombudsman" is, but he seems to be relatively legitimate.

 

In one case, a tenant withdrew from a deal and requested return of the holding deposit on the basis that no written terms had been agreed. The ombudsman's view was that half the deposit should be returned as the tenant had equal responsibility for ensuring that an agreement was made. In this case the deposit was quite large.

[mariner51]

Verbal agreements can be as legally binding just as much as written Contracts, just a little harder to prove in Court

[rennai]

Verbal agreements can be as legally binding just as much as written Contracts, just a little harder to prove in Court

 

there's no verbal agreement about holding deposit if I didn't take the flat

[Steve__M]

Would it not be better to go ahead with what you agreed, and then move again in 6 months time?

 

From what you've said so far I sincerely doubt LL will give you the money back without you suing. I would bet that most judges would see it from the landlord's point of view - that you let him believe that you were intending to sign a contract for nearly 3 weeks.

 

Were there any other communications that could, either, give landlord an indication that you were, or were not certain. E.g. why did he send you photographs?

[mariner51]

there's no verbal agreement about holding deposit if I didn't take the flat

 

 

There was clearly a verbal undertaking for LL to supply and T to occupy flat , evidenced by T paying a deposit and LL accepting it.

You failed to honour your side of bargain.

[raydetinu]

Tend to agree with M51.

[rennai]

M51, reydetinu, others

 

please read my comment about verbal agreement again. I stated: there was no verbal agreement that if I fail to take flat I'd lose paid deposit. Of course there was verbal agreement about me indicating interest to rent. The fact is that deposit I paid was not holding deposit. Holding deposit is not normally equals to a month's rent. LL shouldn't withhold whole amount paid that's unfair; The Judge will take fairness into consideration, I've read that maximum that will be awarded to LL is 2 weeks rent that's if LL wins. What loses did LL incur on empty flat advertised free on Gumtree. I was open to negotiate so that LL can deduct some percentage as a gesture of goodwill but LL doesn't care to reply, so I'm now prepared to sue after 2 weeks.

 

Tend to agree with M51.

[raydetinu]

well that's what courts are for to resolve disputes and differences of opinion.

Holding deposit or not, it was an option to take the property and move in.

The LL has lost rent? and been inconvenienced!

I am sure a judge will be fair. good luck.

[Steve__M]

Hi rennal,

 

Good luck. All cases are different, and we are only people on the internet offering opinions on limited information.

 

Despite some of us thinking you might not win, do let us know how you get on.

 

Steve

[rennai]

http://www.landlordzone.co.uk/content/tenancy-deposits

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 prospective tenancy 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 holding deposit should be an appropriate amount of compensation for the landlord’s loss should the tenant decline – usuallly no more than one week’s rent. The deposit should not be withheld if the tenant fails credit checks or references, as in the eyes of the law it is then the landlord that declines the contract.

 

In theory, when a holding deposit has been taken, if, for any reason, the tenant decides not to go ahead by an agreed date, the holding deposit, or part of it can be retained against administrative costs that have been incurred. Once a tenancy agreement begins, the holding deposit is often off-set against the security deposit or first month’s rent. There is no set formula for working out how much a holding deposit should be, although one week’s rent is commonly used as a guide. It should be an appropriate amount of compensation for the landlord’s loss, should the tenant change their mind at short notice.

Holding deposits resented by tenants

Paying a holding deposit does not legally oblige either party to enter into the tenancy. The grey area occurs when a landlord decides not to proceed. If, for any reason, the landlord decides not to proceed, the holding deposit should be returned. This is true even if the tenant fails credit checks or references, as in the eyes of the law it is then the landlord who has declined the contract.

There is nothing to prevent an unscrupulous landlord from taking a holding deposit, but, in such a buoyant market, being persuaded to accept a higher offer or better prospect in the meantime. Although the landlord should return a holding deposit if they have decided not to proceed, some letting agents may ask for non-refundable deposits, leaving the applicant without a home and out of pocket.

“If it is a non-refundable fee paid without any reciprocal obligation being undertaken by the landlord, then a tenant may lose this money even he or she is ready and willing to enter into the tenancy. The major message is that tenants should check what any up-front payment is for and the terms on which it is to be paid by them,” says Tom Moran, partner at the law firm Speechly Bircham.

Holding deposits are frequently resented by tenants particularly where they are enforced by letting agents. This is because many letting agents will withhold an administration charge if the tenant does not proceed with the tenancy. This ‘charge’ is to cover them for the time and expense of dealing with the tenant. However, this may be unenforceable in law.

The Contract Regulation Unit of the Office of Fair Trading issued a statement which is fairly clear on this point:

“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.”

Tips for Negotiating a Holding Deposit

 

 

• Whenever a holding deposit is requested, the landlord should provide a written document or contract which explains what the deposit is for and any terms and conditions that are appropriate.
  
• The agreement should be signed by both parties and a receipt for the amount paid should also be provided.
  
• Tenants should avoid paying a holding deposit with cash – credit card or cheque is preferable.
  
• If a tenant has paid a holding deposit and subsequently decides not to take on the tenancy, the landlord is likely to try to retain the 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 holding deposits to offset rent loss whilst the property is empty.
  
• It is important to check the terms and conditions of any contract very carefully. The case study below illustrates that landlords or agents will be able to withhold part of a holding deposit in cases where this has been clearly stated in the signed agreement.
  
• 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.
  
• Extra care must be taken in Scotland. Section 82 of the Rent (Scotland) Act 1984 and Section 88 of the Housing (Scotland) Act 1988 prohibits landlords and letting agents from requiring tenants or prospective tenants to pay premiums. Whilst it is fairly common for landlords and letting agents to request a holding deposit, 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.
  

[raydetinu]

All very good, but if LL wont give it back, you will have to go to court and let a judge decide, as said before.

No point in trying to convince us?

[Steve__M]

If I had been the landlord, I would have agreed with you the terms of the holding deposit and issued you with a written copy of those terms. The document you posted describes such good practice.

 

However, as I have said, in a case "The Property Ombudsman" took on he found that the tenant was also partly responsible for agreeing such terms and she lost some of her deposit as a result.

 

I asked this question earlier:

 

Were there any other communications that could, either, give landlord an indication that you were, or were not certain. E.g. why did he send you photographs?

 

Part of the landlord's compensation would be related to his losses. If you paid the deposit then said straightaway "Hang on, could I see some photos before this is finalised" then maybe LL would have continued to market the property till you confirmed, and had an alternative tenant lined up.

[rennai]

@ raydetinu It's obvious you're overly defending the landlord, however I'm too old to be bothered by that. I don't need to convince you or anyone....I only need to convince myself. Details I provided are for any member who may be in my position. Your comments weren't balance but one-sided, which could be misleading!

[honeybee13]

@ raydetinu It's obvious you're overly defending the landlord, however I'm too old to be bothered by that. I don't need to convince you or anyone....I only need to convince myself. Details I provided are for any member who may be in my position. Your comments weren't balance but one-sided, which could be misleading!

 

Hello Rennai.

 

You've been with CAG for a while, so I imagine you know that you ask questions here and receive views from other Caggers.

 

It's up to you if you take the advice.

 

HB

[raydetinu]

Mmm!

Just the way I see it!

A deposit is a commitment to go through with a contract or option to purchase, ( furniture or car, all the same ) and if you change your mind, you pay the price, or at least some of it.

It would be the same if the LL had said, no I am not going to let it to you, he would then, not only need to refund all your monies but any and all your out of pocket expenses incurred by you due to that.

If you cant negotiate with the LL on a reduced cost then you have no option but to go to court.

good luck anyway.

[rennai]

HB,

 

I understand what you mean but raydetinu's comment I complained about wasn't an advice. He's not a judge and can't say what Judge may decide in this case. I accept that I was in breach of verbal agreement but I don't accept that penalty for changing my mind should be for LL to keep the whole amount paid; that would be grossly unfair. Every law makes room for fairness.

 

Any this matter has now been resolved, LL has deducted an amount I THINK is reasonable and fair to cover losses incurred which I have accepted. Common sense rules and out of court is always the best IMHO.

[raydetinu]

Glad you got it sorted, and you are happy with the outcome.

It always pays to negotiate if you can, and be fair to both sides.