holding deposit
📖 What is holding deposit? Meaning and definition
A holding deposit is an amount of money paid by an applicant who wishes to rent a property. Its purpose is to secure the property while references are checked and other pre-tenancy requirements are met. The Tenant Fees Act 2019 governs these payments, classifying them as either permissible or prohibited. If a payment is deemed a prohibited payment, or if the holding deposit exceeds the legally allowed amount, the tenant may be entitled to its return.
In practice, a tenant might pay a holding deposit, for example, £300, to a letting agent after agreeing to rent a property, conditional on a satisfactory reference. If the reference is not obtained, or the tenant cannot meet additional requirements, the question of repayment arises. The tribunal will then determine if any part of the deposit constitutes a prohibited payment and if any exceptions under Schedule 2 of the Tenant Fees Act 2019 apply.
Tenants can apply to the First-Tier Tribunal (Property Chamber) for the recovery of a holding deposit or any part of it that they believe is a prohibited payment. The tribunal has the power to order the landlord or agent to refund the sum. Such an order is enforceable by the county court, meaning the amount payable under the order can be recovered as if it were a county court judgment.
The tribunal's decision will specify the amount to be repaid and the deadline for payment. For instance, a tribunal might order a landlord to repay £730 within 28 days. The process involves the tribunal issuing directions, requesting information from both parties, and potentially holding a hearing, although decisions can also be made on the papers without a hearing.
📋 Requirements
- The payment must have been made to a landlord or letting agent to reserve a property.
- The payment is subject to the provisions of the Tenant Fees Act 2019.
- The tenant seeks recovery of the deposit, alleging it is a prohibited payment or exceeds legal limits.
- The tribunal determines whether any part of the deposit is a prohibited payment and if exceptions apply.
📝 Procedure
- The applicant (tenant) submits an application to the First-Tier Tribunal (Property Chamber) for recovery.
- The tribunal issues directions, requesting further information from the applicant.
- The tribunal sets a timetable for the respondent (landlord/agent) to explain why the sum should not be refunded.
- The tribunal may list the matter for a hearing, or make a decision on the papers without a hearing.
- The tribunal determines if the payment is a prohibited payment under the Tenant Fees Act 2019.
- If successful, the tribunal orders the respondent to refund the specified sum by a certain date.
💡 Examples
- A tenant paid £730 as a holding deposit for a property and later sought its return, arguing it was a prohibited payment under the Tenant Fees Act 2019.
- A prospective tenant paid a £300 holding deposit but was unable to secure the property after failing to obtain a satisfactory reference, leading to a dispute over the deposit's return.
- The tribunal ordered a landlord to repay £323 that was paid as a holding deposit for a rented property, enforcing the repayment under the Tenant Fees Act 2019.
- A tenant applied for the recovery of a holding deposit, claiming it constituted a prohibited payment, and the tribunal subsequently ordered the landlord to refund the amount.
📚 Legal basis
- Tenant Fees Act 2019
❓ Frequently asked questions
What is the purpose of a holding deposit?
A holding deposit is paid by a prospective tenant to reserve a property while pre-tenancy checks, such as referencing, are carried out before a full tenancy agreement is signed.
Can a holding deposit be considered a 'prohibited payment'?
Yes, under the Tenant Fees Act 2019, if a holding deposit exceeds the legally permitted amount or is charged for reasons not allowed by the Act, it can be deemed a prohibited payment.
How can I get my holding deposit back if it's a prohibited payment?
You can apply to the First-Tier Tribunal (Property Chamber) for a determination and an order for the recovery of the holding deposit or the prohibited part of it.
What happens if I don't get a satisfactory reference after paying a holding deposit?
If you paid a holding deposit and a satisfactory reference was not obtained, leading to you being unable to rent the property, the tribunal may need to determine if the deposit should be refunded, considering the Tenant Fees Act 2019.
Is a tribunal order for a holding deposit refund legally enforceable?
Yes, an order from the First-Tier Tribunal for the repayment of a holding deposit is enforceable by order of the county court, meaning it carries the same legal weight as a county court judgment.
Do I need a solicitor to recover a holding deposit?
While you can represent yourself, the process involves legal interpretation of the Tenant Fees Act 2019. You may wish to consult a qualified solicitor for advice on your specific circumstances.