UK Landlord Forum / Life

A prospective tenant suggested a month's deposit to take the rental property off the market, then oddly decided not to proceed when proof of income and job contract were requested (having provided references of new job income, previous landlord and a character reference) . I told applicants and agents meanwhile that I had taken a deposit and the place was off the market pending a viewing (yes the deposit was proposed before viewing - applicant was abroad on business and it is a very nice place). Under these unusual circumstances am I obliged to return the deposit, all or part (eg minus what costs can be shown to be incurred as a result of the prospective tenant actions)?

Was it make absolutely clear that the deposit was a non-refundable holding deposit and if they, the prospective Tenants pulled-out for any reason then it would not be returned?

Written down, signed in blood, witnessed etc. etc.?

If not - kinda unlikely, but you may be able to get away with it - depends on how much they know and are willing to fight. Morally, you should return it unless you made it clear (and they understood) as above.

What costs will be incurred by the actions?

The key point - at least in my mind - was that the prospective suggested offering a payment to take the property off the market. My side of the bargain was to do so - for example writing to other applicants saying a payment had been made to take off the market.

Now the theological point is whether there is a material difference between an implied contract where - solely at the suggestion of the applicant - money is paid to take it off the market - and the conventional deposit to which rental deposit arrangements would apply?

Are these quite different contracts? If so the 'take off the market' payment may be forfeit?

Frankly I am less concerned with the money, although I do not ignore its uses, than being messed about by someone who seems to think that his interests are the only ones in the world and to hell with anyone else being put to any trouble - my excellent tenant arranging the movers only for a move in a week only to have to cancel them when this person has a hissy fit and turns 180 degrees overnight.

I found this on a site called 'tenancy tips' - for tenants -

'A holding deposit is completely seperate from a tenancy deposit/security bond. A holding deposit is a sum of money paid to a landlord or letting agent to reserve a rental property before the signing of a tenancy agreement. A holding deposit is normally non-refundable if you were to withdraw your application for tenancy.

A Holding deposit does not need to be registered under the tenancy deposit rules as it is not held as security in respect of a tenant's liabilities under a tenancy agreement as no tenancy agreement has been signed.'

As advice on a tenant site that is interesting as it seems to apply to this case. Especially the non-refundable line?

You aren't bothering to answer the questions asked. Which makes me fear the response. Good luck.

Came across 'The Competitions and Markets Authority Guidance for Lettings Professionals on Consumer Protection law' which in brief suggests the deposit is returned minus any losses incurred.

As we all know, those are notoriously difficult to quantify, but one example that is given includes an agent with a 'file' showing their admin costs for one particular case as £500 so the adjudication was to return the deposit minus that.

As we all tend to spend time on these things rather than necessarily identifiable bills, charging out admin time at say £50 per hour - a decent professional rate of pay - seems one solution.

I let a couple of tenant enquiries go in the course of the rumpus, but how do you charge for that? My tenant instructed movers and then cancelled, but unless he paid instead of rearranging, then again, difficult to quantify - except in terms of his time.

Has anyone else been in a similar position and found a reasonably rational way to charge?

Hi Hippogriff - my apologies for not responding directly. To your first question the answer would be no.

However, the situation seemed to me slightly different in that I didn't request a deposit, the applicant proposed it - and specifically as a payment to take the property off the market. My side of that bargain was to do that.

At that point I was too hopelessly amateur to have him sign a document re conditions, which I at least will have learned if it comes up again.

The second issue, about the morality involved, seems to me to be about 'fair' in the legal sense, and the first statement I found - and from a site advising tenants - said 'normally' not refunded. The legal stuff made more sense - return with deductions for costs - if they can be reasonably quantified.

The case quoted, that deducted 'Admin' costs, suggested a way forward - which is where I am at the moment and would be keen to hear others' experience.

Holding Deposits are a PITA.

Because - unless their purpose is clearly outlined and agreed - there is always room for complaint when things go wrong... and I suspect that's kinda where you are now.

With most things relating to tenancies, my advice is more usually geared towards the pragmatic - the solution that allows you to 'move on'. You could return the deposit minus some justifiable deductions and hope the person receiving the balance decides it's too much hassle to follow it up.

But the fact still remains that it wasn't 100% clear and unambiguous as to what this money was for... not objectively. You don't have a document that will stand up anywhere, clearly saying this money was a holding deposit and if the Tenant pulled out, for any reason, it would be non-refundable - all you've got is assumptions, presumptions and websites saying what is considered normal. They're not good enough to avoid an accusation of theft - if that is what it comes to.

I doubt it... but you never know, right?

Charging for your own time is generally a no-go area. Making your own assumptions about a "fair hourly rate", certainly not. £50 per hour would be a bit of a laugh. It's a minefield.

I agree about the uncertainty. I had not been in that position before - offered 12 months upfront plus a month deposit to take it off the market - but hopefully one learns from experience!

Your advice is very sensible, and what I decided to do in the end was to apply the Socratic Method!

I asked the applicant what HE would deduct for time spent, turning enquiries away etc. He wrote back saying I clearly had a figure in mind - an interesting and incorrect assumption - I hadn't. He nominated £400, and I accepted.

I'm not sure I agree entirely with your point about objectively. I quoted above from a doc summarised on a net agent site, itself taken from a government document that included case-studies. One of those included a judgement where 'Admin' costs were allowed at £500 - didn't say how that was quantified only that the figure was given in a 'file' of the agents.

You may be right about an hourly rate - but many related trades -  a chap doing drawings for example, can charge £50 per hour - that's what I pay for that and similar services. However, testing it in court - I am sure you would be right there - would be another matter.

Thank you for your practical advice - I was lucky that Socrates came to my rescue!

Socrates always comes to the rescue.

A final and very nasty twist in the tail seemed a dead cert yesterday. I had lunch with a friend and described the process I had gone through - and he said that it sounded like a well-known scam which would end up with me not £400 in the black, but £2000 in the red!

The scam is to offer inducements (check), cash up-front (check), even without viewing the flat (check), from someone you have never seen or heard from before (check), who happens to be abroad on work (check), loves the flat and is mad-keen to reserve it (check).

To reiterate, my applicant rang from Sweden, offered up to 12 months rental up-front plus a month's rental to take it off the market. He provided, with a few odd glitches like references sent but not arriving by email, all that was asked. He paid up £2400 for a month's rental, but was worried that the big cash payout he had for selling his last business was tied up and so it was back to monthly payments.

Next day, he was worried he had paid the Holding Deposit from the wrong account and could he swap it from another account - with me returning the original first? It was at that point all the alarms went off - from 12 months upfront plus a month as Holding - to zero in 12 hours?

I offered for him to pay his new payment first and then I would immediately return his original one.

However, he didn't feel 'comfortable' (I so loathe touchyfeely) with doing that, and announced we had hit a Brick Wall. I gave him my word I would return the original deposit, but now he had lost all faith in me, the flat, and the universe, and turned away for ever and ever, amen.

I did my Socratic bit and returned him £2000.

So - my good friend said I had probably lost that £2000, as the original £2400 would be withdrawn from my account within about two weeks, as although it showed as a credit, it was probably not 100% confirmed. My £2000 payment was, and I would just lose that and not see the £2400 again - aaargh.

I called the bank and perhaps this was a scam six months ago and they have changed the rules - others may know far better than me - but as both payments were on the same account my bank said the fraud guys thought it unlikely to be a scam - usually the return payment is requested to another account. And the bank wouldn't return the £2400 - the source bank would have to contact them and they would have to ask me if I approved the cancellation - not sure if that's new or not - but fingers-crossed - I haven't actually lost the £2000.

I go thru the tale in case anyone else comes across it - and as a scam (which I hope mine is not). Uncanny how close the circumstances were, though, in this case to everything scammy. I will be very lucky if it turns out not to be the case...

Perhaps he just got his timings wrong and the funds had time to clear before you returned them, or the original payment was a smokescreen and the second deposit, if you'd agreed to it, would have been the one that did a vanishing act.

A common-ish fraud at the moment involves saying that you'll make an electronic payment but in fact depositing a cheque in a rapid deposit envelope at a branch. You can write on the envelope what you want to appear on the statement so, if you put something like "BillPay Ref AB66XYZ" it'll look enough like an electronic payment to fool the unwary. The mark looks online, sees what looks like an electronic payment, assumes it's cleared funds, and allows you to leave with the goods / returns your deposit / repays the payment you "accidentally paid into the wrong account". You generally have 5-7 working days to stop a cheque so there's even room to play it casual and wait a couple of days.

Thank you for that further information - I hope it will help others even if I am lucky enough to get away with it.

Despite the very scammy circumstances I am still not sure if it was a scam or merely a very neurotic prospective tenant.

If the cleared funds do disappear then I will know it was a cheque etc - although I would expect the bank to tell me that - if they checked properly.

I am tempted to phone his 'employer' to see if the story checks out or they have never heard of him...

I'll check again tomorrow that the funds are in fact cleared and not the current fraud you detail...

He was very insistent upon returning the funds, and that may have been a matter of timing the funds clearing.

The smokescreen idea is a possible I suppose, except the return account would, I was told, would normally be different from the issuing one if it were a scam, for the first payment he made.

Of course, I don't know what the second payment would have brought as requests...