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Holding deposits

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When you make an offer on a property and agree to formally apply for the tenancy (if there are any screening processes in place), you will normally be asked to provide a holding deposit.

Sometimes this can be a nominal amount, such as twenty-five or fifty pounds, but it is not uncommon for them to be as high as several hundred pounds. This payment will be made by cash or switch - a cheque is almost never acceptable as a holding deposit. If everything proceeds as normal, the holding deposit will normally be set against the first months rent and the deposit due, both of which are payable before you move in.

However, there are a number of scenarios you should be aware of that may result in a different use for your holding deposit:

  • The holding deposit is non-refundable in the event that you pull out of the deal. Tenancies do not proceed for a host of different reasons. You may withdraw your application because you have a change of heart for one of millions of reasons. You may also get rejected by the referencing company or for failing to meet some other criteria set by the landlord or letting agent. If the tenancy doesn't proceed, usually within a set timescale, you may lose all or part of the holding deposit. The justification for this on behalf of the letting agent is the administrative expenses that they incur in taking the process as far as they have done.

  • If the tenancy does not proceed because the landlord decides to withdraw the property, then you should almost always be able to reclaim the holding deposit.

  • With several lettings agents competing to let the same property, there is a risk that although you put down your deposit at a certain value, someone else will put down a deposit for a different value through another agent, or even through the same one if they are particularly dodgy. The landlord will almost always take the tenant offering the higher rental value even if they came in after the first party had put down holding deposit. You may think that this makes the holding deposit essentially meaning less, since it really offers no legal guarantee of your right to take up the tenancy on a property - you're right it does.

  • Grey areas surround incidences of where agents have been less than truthful in an attempt to get you into a property. If you agree to move in, pay your holding deposit and then find something that the agent either lied about or should have told you, which forces you to change your mind about the place, then you will have a fight on your hands to get the holding deposit back. Good agencies will refund them if you shout loud enough - they have a reputation to uphold after all.
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