Let’s talk deposits!
After you have viewed a property and are happy that it is the one, your agent will ask you to place a holding deposit to show you’re committed to moving forward with entering into a tenancy agreement for the property. This is called a holding deposit and in London is usually £500.
What is a holding deposit for?
A holding deposit means that you have reserved the property as yours whilst the necessary paperwork is sorted. The agency will then cease marketing the property and viewings.
What happens if I don’t pass the reference checks?
Before you wish to pay the holding deposit the agency will ask you to provide some basic details of employment and salary status. This is to initially check that you are a suitable candidate to move forward with. If the reference checks show that you have provided false/misleading information or detrimental information is revealed (e.g. CCJ’s, negative landlord reference) then the agency is entitled to hold back a reasonable sum to cover the costs incurred for reference checking. If the landlord thought that your references were not sufficiently good enough and you are not their idea of the ideal tenant your holding deposit should be refunded.
What happens if I can no longer go ahead with the property?
The idea behind the holding deposit is that it prevents people from committing to a property but for whatever reason decide to change their mind, leaving the landlord in the lurch with potentially an empty property. It is there to safeguard against time-wasters and to show you have real intentions to rent the property.
Your agent will provide you with a receipt for the holding deposit, and can confirm under what circumstances you would receive a refund.
When do I get the holding deposit back once I move in?
Once the tenancy agreement is signed and you are ready to pay the final amount the holding deposit is detracted from this sum. So-
One Month’s Rent + 6 Week Deposit + Admin Fees= Total – Holding Deposit= Final Amount to Pay.
Once the tenancy contract is signed you will be asked to pay a tenancy deposit, which is usually between 1 month and 6 weeks rent. Some cautious landlords can ask for 2 months, in certain circumstances for example if you are students or have a pet. The agent or landlord is legally obligated to transfer or register this with one of the governmental protected deposit schemes if your assured shorthold tenancy has started or renewed after 6th April 2007. Deposits must be registered within 30 days of the agent/landlord receiving it.
There are two types of deposit schemes that your deposit will be registered with-
1. Custodial Schemes
- Your deposit is transferred into the deposit schemes account for safekeeping. You will be emailed the details and provided your unique ID number which you will need to process the refund at the end of the tenancy. Your deposit is safeguarded in this account until the end of the tenancy, and if any amount of your deposit comes into dispute then it is held there until this is resolved. The deposit scheme acts as a third party. If both sides agree on the amount of deposit to be repaid then this will be processed back to within 5 days.
Examples of custodial schemes- Deposit Protection Service (DPS)
2. Insurance Schemes
- Unlike the custodial scheme the landlord can keep the deposit in their own bank account. The landlord usually pays a registration fee whereas the custodial schemes are free as they retain the interest to cover their admin. This scheme does also have a dispute resolution service so it is not left between you and the landlord to battle it out.
Examples of insurance schemes- Tenancy Deposit Scheme (TDS), My deposits
What happens if I cannot get hold of my landlord to return my deposit?
If your landlord has registered your deposit and you cannot get hold of them to process the return, then you can contact the scheme’s administrator directly, and they will request to the landlord your application. They have 30 days to respond and if they do not then the deposit will be returned in full to you.
I don’t think my landlord/ agent registered my deposit?
If you do not think your deposit has been safeguarded then you can check online. For example via this website.
If it has not been then due to changes in the law in April 2012 they can incur a penalty of between 1- 3 times the value of the deposit decided via the courts.
One of our landlords came under attack due to his failure to register a deposit. We had been contacted by him to let his property, however he sought our advice after he came into a dispute with his previous tenant. He had attempted to charge her an additional amount for cleaning and she did not agree. They had hit a brick wall with their negotiations and therefore she sought legal help which unearthed that the landlord had not registered the deposit. Unfortunately the landlord had been travelling at the time and had forgotten all about it. He faced being fined up to 3 times the deposit value, and after a heavy amount of pleading with the previous tenant he repaid the deposit in full forgetting any extra charges he had tried to implement. Lessons learned! At Property People if a landlord instructs us that they will be registering the deposit, we ensure that they provide us with their tenancy deposit registration details so we can protect our tenants. We have an account with Deposit Protection Service which currently holds over a million in our tenant’s deposits!
Note- If you are looking for a letting agent in Wimbledon Park Southfields who pay attention to detail and are trustworthy please look us up- www.property-people.co.uk
By Natalie Elms
Senior Lettings Negotiator at Property People. Letting Agents in Wimbledon Park
Tags: tenancy deposit, deposit, holding deposit, custodial scheme, assured shorthold tenancy agreement, tenancy agreement, ast, DPS, deposit protection, tenants, landlords, tenancy deposit law, letting agents in southfields, letting agents in wimbledon park