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Letting agents 'falling foul of holding deposit rules'

suzy hershman deposit advice

I understand from my discussions with Trading Standards that holding deposits charged by letting agents to tenants are one of the major areas where illegal activity is taking place within the private rented sector.

Such deposits are allowed by law and enable a tenant to secure a property exclusively in a competitive market while they go through referencing and the paperwork is completed before a tenancy begins.

Week's rent

The deposit charged must not be more than a week’s rent and there are plenty of other rules around how they should be handled – but many agents ignore or are ignorant of them despite being required since the Tenant Fees Act 2019 became law.

The main mistakes whether genuine or deliberate that I would urge letting agents, all of whom are acting on behalf of landlords lets remember, to avoid are:

-             Written agreements to take a deposit include unfair terms – for example that it is a ‘non-refundable fee’.

-             Tenants are not given a draft tenancy agreement on receipt of their holding deposit.

-             Properties are not taken off the market even though a holding deposit has been paid.

-             Multiple deposits for the same property are taken from different tenants even though the money is supposed to guarantee exclusivity.

-             Deposits are not returned when a tenant fails referencing. This is only legal when a tenant has given false or inaccurate information when submitting themselves for referencing such as bogus employment details or not revealing multiple County Court Judgements (CCJs), for example. The point is that it’s the landlord who asks for referencing to protect themselves, so genuinely failing referencing is not a valid reason to withhold a deposit.

-             The timings set out in the fact are ignored, which is a breach. These are that the tenancy contract must start within 15 days of the deposit being paid unless a new start date is mutually agreed and documented (as student tenancies often need to be). Once that date passes, the tenant must have their deposit returned. There are exceptions, which can be read on the MyDeposits website.

Dodgy tenant

One worrying aspect of all this is that some agents are not aware of the law on even a basic level, which is doubly important because knowledge can be important when dealing with dodgy tenants too; one recent example we handled was an agent in Birmingham who referenced a couple for a tenancy but although one passed, found that the other person had not declared CCJs against their name.

If it had been a single undeclared CCJ then the deposit might still have been returned as it’s fair for a tenant to claim that they were unaware of it. But it turned out they had seven CCJs against their name. The deposit was not returned.

Suzy Hershman is Resolution Department Lead at the Property Redress Scheme.


Letting agents
Property redress scheme