Sarah Rushbook Blog

Holding deposits

Despite the fact that only 23 of the 1,262 complaints received by The Property Ombudsman during 2010 were specifically related to holding deposits, he nevertheless felt the need to highlight this particular group of complaints in his end of year report.

Why? Well, probably because where clients’ money is concerned, most people would expect particularly high standards of probity and professionalism to apply.

The commonest disagreements over deposits tend to arise when the agent for whatever reason fails to return them in full.

As with any kind of deposit, it is therefore absolutely essential that the agent takes the necessary steps to ensure that both the applicant and the landlord are made fully aware of the precise purpose of the holding deposit – and in what circumstances all or part of it may be forfeited.

In the case of the applicant, it is particularly important that this information is given in writing before they pay the deposit.

That way, you minimise the likelihood of complaints arising in the first place, while at the same time furnishing tangible evidence – should it be needed – of your own due diligence.

Since we provide property management services to many different agents, we at Rushbrook & Rathbone obviously need to be particularly hot on this kind of thing. Here is the standard text we use in confirmation letters or emails.

First, to landlords:

While the referencing and pre-tenancy processes are taking place, we will ask the applicant to pay a Holding Deposit of £x. This amount is equivalent to two weeks rent.

If the applicant provides satisfactory references within the timescale of ten working days and proceeds to take tenancy of the said property, the total of the holding deposit will be offset against the initial invoices for rent, deposit, administration fees and costs.

In the event that you are unable to proceed with the tenancy for any reason, the holding deposit will be refunded to the applicant. 

In the event that the applicant’s references prove unsatisfactory within the timescale of ten working days and because of this you as the landlord feel unable to proceed with the tenancy, the total of the holding deposit, less administrations fees and costs, will be refunded to the applicant.

However … in the event that the applicant fails to provide sufficient information for satisfactory references to be taken up within the timescale of ten working days – or for any reason, having provided satisfactory references, subsequently withdraws the offer for tenancy of the said property – the total of the holding deposit, less administration fees and costs, will, at your discretion, be forfeited and transferred to you as compensation.

Meanwhile, for applicants:

While the referencing and pre-tenancy processes are taking place, we will ask you to pay a Holding Deposit of  £x. This amount is equivalent to two weeks rent.

If you provide satisfactory references within the time scale of ten working days and proceed to take tenancy of the said property, the total of your holding deposit will be offset against the initial invoices for rent, deposit, administration fees and costs.

In the event that the landlord is unable to proceed with the tenancy for any reason, your holding deposit will be refunded to you, less the costs incurred to process references. On your authority, we will also happily release your references to future possible landlords or letting agents.

In the event that your references prove unsatisfactory to the landlord within the timescale of ten working days and as a result the landlord feels unable to proceed with the tenancy, the total of your holding deposit, less administration fees and costs, will be refunded to you.

However … in the event that you fail to provide sufficient information for satisfactory references to be taken within the timescale of ten working days – or, having provided satisfactory references, subsequently fail to conclude your offer for tenancy of the said property for any reason by the agreed date of the offer – the total of your holding deposit, less administration fees and costs, will, at the landlord’s discretion, be forfeited and transferred to the landlord as compensation.

* Sarah Rushbrook is managing director and founding partner of Rushbrook & Rathbone, providers of outsourced property management