When is a holding deposit, NOT a holding deposit?

Tyler Short, Researcher & Staff Writer

Are UK renters being exploited because of a fatally flawed law?

Until recently, I knew nothing about employee relocation. Since joining the team at Saunders 1865, I’ve been learning about this amazing profession at breakneck speed.

I’ve learnt that our firm provides businesses all over the world with international relocation services that support their efforts to ACQUIRE and RETAIN the best talent in the world.

A major part of the work is helping highly valued employees find and secure rental homes near their workplaces. The employees we help are being relocated to a foreign jurisdiction; they have no idea where they want to live and generally know nothing about the way the rental market in the destination city works.

Our corporate clients are moving critical talent to cities all over the globe. Rental markets in those cities vary enormously. It’s a big comfort to inbound talent to know they have expert assistance and advice throughout the process.

Imagine my surprise when I discovered that one of the most challenging international

destination cities is London, England.

My colleagues tell me that the rental market in the UK is effectively unregulated; consequently, it’s a bit like the Wild West!

Our CEO, Tony Coeasked me to write an article (this one) on the subject “When is a holding deposit NOT a holding deposit?” Okay, I thought, what’s all this about! My research led me to the Tenant Fee Act 2019.

What did the Tenant Fee Act 2019 (the Act) do?

The law was a good step forward in banning landlords and their agents from charging fees to tenants as well as to landlords. Our firm always supported the ban, pointing out that these fees (for inventories, drawing up tenancy agreements, doing reference checks, etc.) were costs that landlords should pay as part being in the business of renting out homes.

The Act went further in that it intended to address a further problem with the renting process involving how landlords and their agents take so-called “holding deposits”.  A holding deposit is supposed to represent a sum of money that the landlord requires renters to pay as a condition of processing their application to rent a home.

The amount of the holding deposit (before the Act) that could be demanded was unlimited, and the whole process was effectively unregulated.

The Act introduced the following measures around holding deposits:

  1. A landlord or agent can take a holding deposit from a renter to reserve a property whilst reference checks and tenancy agreements are being processed.
  2. A landlord or agent cannot ask you for more than one week’s rent as a holding deposit
  3. A landlord or agent should stop advertising the property once a holding deposit has been paid

But there was a glaring omission!

The “holding” adjective implies that the property will be reserved for that prospective tenant while their application was being processed.

That means the renter has a reasonable expectation that, once the holding deposit is paid, the landlord will stop marketing the property and will not enter negotiations with any other prospective tenant.

The intention of this part of the Act was clear. It was introduced to ensure that a holding deposit will reserve the property for the applicant while the application is being processed.Within the government’s guidance it says, “a landlord or agent should stop advertising a property once a holding deposit has been paid”.

But government guidance is not law, and I can find no such requirement stated in the Act.  I say that was a glaring omission.

What’s happening in the trenches?

In our work representing renters for corporate clients (employers who are relocating talent to the UK), we have had numerous cases where landlords’ agents have taken holding deposits, and then gone on to let the property to another applicant.  There are no consequences (due to the glaring omission); all the agents must do is return the applicant’s holding deposit.  How can that be right?

On the plus side, reputable agents (in our experience) tend not to abuse renters in this way; but there are many agents who do the opposite, they take holding deposits from one applicant and rent to another.

Some unscrupulous letting agents refuse to put a renter’s offer to their client landlord unless the applicant first pays a holding deposit.

Despite the gap in our law, in our work for renters we do the best we can to protect our applicant tenants against holding deposit abuse, as well as other abusive strategies deployed by some landlords and too many letting agents.

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Wanted to share with you that it has been a pleasure to work with Saunders 1865. Both ladies have been extremely helpful, very good in listening to our needs and very reactive and responsive during our relocation to London from Austin Texas. We are very thankful for the help we have received and we highly appreciate the effort of Saunders 1865. 

Siavosh Akhtary, Texas, USA