UK Landlord Forum / Life

Hi this is the first time on the forum and need advice already!
My tenants signed a Non-Refundable Holding Deposit beginning of December -  it stated clearly this is non-refundable until your moving in date and then it will be protected by Law. A day before New Years Eve (so not including Bank Holiday) they gave me just one days notice and emailed saying they didn't want to move in (giving no reason) on 2nd January and demanded their deposit back or else will take me to court! I have done absolutely nothing wrong I consider myself an excellent Landlord and follow everything by the book so my tenants are well looked after - Obviously I am looking for new tenants which could take a month to do so - but I really need to ask you that in fact I don't have to return their deposit, even though they have threatened with me with court proceedings? I have never been in this situation before - any advice would be wonderful!

Always be wary of any advice received from a blog/forum..(especially my own)
Do your own research

Impossible to advise without reading the agreement that was signed, it very important how it is phrased etc
A tenant can always take you to court..the real question is will they win?

I would suggest you look at your agreement and look at the OFT guidance on unfair terms in a tenancy agreement (Start at Clause 3.41.....can be found at:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/284440/oft356.pdf

Notwithstanding the guidance (which is technically non commital on any term i.e. uses phrases such as "likely to be unfair". "maybe considered unfair")...depending on how your agreement is written you might be on reasonable grounds to keep the entire deposit.

An amicable solution (if you want to be amicable) would be to only take out your costs/loss and return the rest if any is left.
In any case best to justify retention of the deposit on grounds of costs/loss in writing to your counterparty...will play in your favour later.

PS: I am assuming you are not in Scotland where a non-refundable deposit is illegal?

The non technical advice is that these folks have clearly screwed up and have decided that the best way to get their money back is to scare you...how to scare you?  "Im gonna sue you mate"..."I'll see you in court"..."I know my rights [ invariably they do not ], and Im going to go to the small claims court"   blah blah blah blah.........heard it all .....yawn.   Ignore is another option but I suspect you will want closure, therefore amicable solution.

Best of luck

Wow many thanks - I am not in Scotland!
I would have love to have written Bla Bla Bla so mnay thanks for doing it on my behalf!

Holding deposit protected by what law? These can be tricky, but if it was formally documented as a non-refundable holding deposit I would wish to call their bluff. Even better if you have something signed by them.

Thanks for your reply - (am finding this Landlords Forum excellent to be apart of and LEARN!)
Yes it was signed as non-refundable, they have a hard copy also ourselves.
Friday morning we will see a solicitor for a small chat and then I will reply fully to the tenants after our research,  that in fact we will not be refunding a Non-Refundable Deposit in which you agreed and signed for.

Can you show us the raw text of what was signed?

It should be a black and white case, really.

Still unsure what law you are referring to for protecting it... that is a security deposit that protection applies to. I hope you've not intermingled two things?

Sorry perhaps I didn't make myself clear - below is what was written when they signed and agreed

'The Deposit is Non-Refundable until your moving in date, then it will become at the start and duration of your Tenancy Agreement protected by My Deposits Scheme. First month's rent is to be received prior to your moving in date'

The By Law part in which I wrote previously is when the deposit would have been protected by Law in which I use the company 'My Deposits' to do so

Is that more clear??

Oh God have I done something wrong ??

It's nowhere near as clear-cut as I would like, no, not at all.

It's coming across as the security deposit. This is an entirely different thing to a holding deposit. A holding deposit that you can retain is a kind of penalty if someone breaks out of the contract prior to its commencement - that's the situation you've described.

A security deposit - one you protect with someone like My Deposits - is to make it easier for you to claim for damages (apart from wear and tear) that may arise during a tenancy. It is not your money. It is not My Deposits money. It is the Tenant's money, it's just held by a third party for safe-keeping.

You will also note that your text does not mention "holding deposit" at all.

Sorry to be the bearer of bad news but I now think you are on a sticky wicket. Others may chime-in...

I really appreciate your view on this matter really do  - but I need to get this right in my mind.

So, anotherwards if these tenants on the 4th December with whom we explained that this they are signing is a holding deposit and that as Landlords this is what we required -  as they wanted us to not advertise the property further and for us to wait for them to move in basically a month later on 2nd January - As you know This 'holding deposit' stopped us from looking for other tenants who could have possibly moved in immediately. Isn't it clear due to the timescale - a month - to moving in that they wanted to 'hold' our property and so paid a non-refundable deposit to hold it, prior to them moving in? Which they cancelled....

Does this also mean that on 02/01/15 when the tenants who were suppose to move in, yet didn't  - but if they did  - That I should have given the money that they have pre-paid on 04/12 - back to the tenants only for them to immediately give it back to me as it now becomes a security deposit??
(where I know then that's not my money) BUT the point being is because they withdrew before they moved in I have lost money, I am of course finding other tenants but this could take another month.

So what in fact did I do wrong - is it simply because I didn't include the word 'Holding' even though this was explained? And anyone can surely see that due to the timescale they paid to hold our property before they moved in? I have completely waffled on but I do not want to return their Non-Refundable Deposit due to without explanation they have simply changed their minds.

Surely as a Landlord changing one's mind at the last moment - I would be penalised?? And so I should!

I agree with everything you say, I think.

I am merely pointing out to you that this deposit appears to have been conflated into - potentially - two things - the first being a holding deposit (but it was only explained verbally, it seems) and the second being a security deposit, which it would morph into when the tenancy commenced. It's not like you took a holding deposit that would be returned to the Tenants when the tenancy started and then you'd take a separate and distinct security deposit to protect.

Now, that said...

You should not lose-out financially, that much is sure. However, you appear to have ex-prospective Tenants here who either did not understand, or are trying it on and claiming they did not understand, that this was a holding deposit.

Something that should have been black-and-white has become something grey. The text you supplied the forum with is not clear at all, in my mind at least. I think you should still call their bluff but if they escalate matters then I am more concerned about your chances now than I was at the beginning. I find the law often favours consumers in cases like this and if there is doubt or a grey area then it could not bode well. I think there is that doubt.

Is there a chance to negotiate something in the middle where both parties can be dissatisfied but actually feel that they got something out of this?

I can feel a movie coming on  with regards to 'Shades of Greying'  I will name it..... 'The Holding'.....but I'll move swiftly on........

After the one to one with Solicitor on Friday and then hopefully we find tenants soon I just MAY compromise but it will be a Bitter Sweet thing I'm afraid,  as I have never threatened to take someone to court so quickly and without justification.......simply awful!

I think,  as a tenant like I was for years who was treated abominably by a Landlord, I vowed never ever to be THAT Landlord and do things by the book - so I'm afraid I have taken it slightly personally But I must remember this is a business. And I must I must write in the Future - Holding Deposit!


Many thanks again!

Oh shame...as I indicated, it is very important how it is phrased...

'The Deposit is Non-Refundable until your moving in date, then it will become at the start and duration of your Tenancy Agreement protected by My Deposits...'

That phrasing is quite weak (and incorrect for other reasons e.g moving in date is irrelevant - did a solicitor really write that?) it moves things very much into an argument of whether the deposit taken is a non-refundable holding deposit or is it actually the rent deposit.  (Have to agree with Hippo). 
The capitalisation of certain words indicates these are defined terms? In the holding deposit agreement? Hopefully not in the tenancy agreement? Particularly the word "Deposit"

Perhaps one saving grace...what is the amount of holding deposit and the monthly rent?  It's a weak argument but it helps if they are different.

I still think though you are ok, but do agree with Hippo your case is weakened by muddling of the two Deposits, you are better placed if you go for amicable solution.
Do let us know what the solicitor says on Friday morning...

Best of luck

Quote from: theangrylandlord on January 07, 2016, 01:40:33 PMThe capitalisation of certain words indicates these are defined terms?

Observe how jhoult writes... 

I am an Actor also - words are important to me - I promise I won't use capitals again on this forum starting from NOW!

Thanks again! I also look forward to Friday's chat with solicitor and I will update on the Forum.

Regards

Julie

Hi Julie
I hope you see this before your solicitor chat on Friday...
Was this holding deposit agreement drawn up as a Deed?

If not I'd be very interested to see if your solicitor thinks that is will be a problem...the problem is technically there is no consideration and so am not convinced a simple agreement is actually enforceable in this case?  I'm not sure it is but I'd be interested to see what your legal counsel advises.

Still think you blag your way through this though 

Best of luck

My Partner has just left the solicitor and phoned me and now I am sharing with you  - The solicitor didn't even need to look at the paperwork, he was told everything that happened with regards to the tenants cancelling and giving us a days notice   - The Solicitor said that  I have no worries and I do not need to pay the deposit back due to the on-going costs in finding new tenants.

You see I just needed to hear that from the main man.

I am so glad to have found out about this Forum and dare I say it? I look forward to the next problem to share (only joking)

Am very happy and I have totally exhaled

But I do need to fully understand and research about Holding Deposit

Good that you are reassured, but that - of course - does not stop the ex-prospective Tenants taking action against you (hopefully if it got that far it wouldn't be because they got differing legal advice). It just means you can ignore them, happily, until formal notice lands on your doorstep... don't ignore that if it eventually comes.

Awesome news.
It would have helped if he put that opinion in writing as you would have had something to show the non-tenants and encouraged them to "go fly a kite"... It's a bit your opinion vs theirs at the moment so they might yet do something daft...

But good result ...

Many thanks for the comments and I can assure you I won't ignore any notice

We manage our own property so this has been an eye opener with regards to being clearer about The Holding Deposit side of things - have just found this written beautifully clear - just want to share with regards to Tenants side of things -

What is a holding deposit?

You pay a holding deposit before you sign your tenancy agreement as a guarantee you're definitely taking the house or flat.

You should get the holding deposit back once all the contracts are signed ­– or it will be included as part of your tenancy deposit. Ask the landlord or letting agent to give you written confirmation they received it, and a receipt.

If you change your mind and don't move in you won't get the holding deposit back. But if it's the landlord who changes their mind, then you will get it back.