As a landlord in Peterborough, you may ask what are holding deposits, and wonder how they work. Two common questions our team at PTL Lettings often answer are:
“Why are holding deposits needed?“
“When is a holding deposit returned?”
To help, the PTL Lettings team has compiled an overview so you can gain an understanding of holding deposits for landlords.
What Are Holding Deposits And Are They The Same As A Tenancy Deposit?
Confusion arises when landlords mistake a holding deposit and a tenancy deposit as the same thing. This isn’t the case. A holding fee is money prospective tenants pay when they apply for a rental property in Peterborough.
This secures the property and is made before the individual becomes a tenant. Once the deposit is paid, landlords are legally obligated to remove the rental property in Peterborough from the market. Legally, a holding deposit can only be the maximum amount of one week of rent. A tenancy deposit differs and is paid before the tenant moves into the rental property. This can be a maximum of 5 weeks’ rent in England if the annual rent is under £50,000. It’s six weeks’ rent if the annual rent is over that figure.
A tenancy deposit is placed into one of the deposit protection schemes approved by the government . If this doesn’t happen within 30 days of its receipt, landlords may face penalties. Holding deposits are not required by law to be included in one of the deposit protection schemes.
The Tenant Fees Act of 2019 introduced by the government aims to make the private rental market easier for tenants. It achieved this by removing administrative charges and high initial expenses that would often overwhelm first-time renters.
Among the reforms was the adjustment of the amount of holding deposit landlords can request from tenants.
Reference Checks And Holding Fees
Once a tenant has paid, the landlord carries out reference checks. When the tenant passes those checks, the next step is to sign the tenancy agreement and arrange a move-in date. Should the tenant fail the checks however, the amount paid as a holding deposit will come into play.
PTL lettings can help with referencing and all other aspects of letting your property.
Can A Prospective Tenant Get A Holding Deposit Back if They Fail Referencing?
Failing the referencing process doesn’t automatically give the landlord the right to withhold any sums paid. However, if the tenant has provided false or misleading information, the landlord has the right to keep the holding deposit. If the tenant doesn’t pass the affordability checks, the landlord may still offer a tenancy. In this case, the tenant would need to find a guarantor or pay rent upfront. If the landlord chooses to no longer proceed with renting a property, the tenant will receive their deposit back.
In a similar vein, if the tenant submits their application and progresses to referencing before backing out, retaining the deposit is often the course of action.
When Is A Holding Deposit Returned?
When the deposit is paid by the tenant, an agreement with the landlord must be reached within 15 days. If this deadline is not met and the tenant has done all they can to secure a tenancy, the landlord must refund the full deposit within 7 days. When everything goes smoothly with the tenant’s application, the tenant will receive the amount of their deposit back. This is usually in the form of a deduction from the first month of rent paid.
Are Tenant Fees And Holding Deposits The Same Thing?
Holding deposits aren’t fees that tenants are charged. Rather, they’re safety measures that protect landlords and their agents from any financial losses. A ban on tenant fees enacted in 2019 has caused some confusion. However, since tenants receive back the amount they pay, it isn’t deemed to be a fee. Therefore, it’s entirely acceptable and encouraged.
Want to Learn More About Holding and Tenancy Deposits?
To find out more, please get in touch with the lettings in Peterborough team at PTL Lettings on 01733 555183 or email info@ptl-lettings.co.uk.
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Frequently Asked Questions
What’s the difference between a holding deposit and a tenancy deposit?
A holding deposit secures the property during the application process (maximum one week’s rent). A tenancy deposit protects against damage during the tenancy (maximum 5 or 6 weeks’ rent).
Can I keep the holding deposit if a tenant fails referencing?
Only if they provided false information. You can still rent to them with a guarantor or upfront rent.
When should I return a holding deposit?
If an agreement isn’t reached within 15 days or the landlord pulls out, the full deposit should be returned within 7 days.
Are holding deposits banned by the Tenant Fees Act?
No, because the tenant gets the money back (usually deducted from the first month’s rent). It’s not considered a fee.
Rental Property Management in Peterborough For landlords
At PTL Lettings we are your local experts for property management in Peterborough. If you need expert letting agent or property management services or advice, our experienced team can help. Contact us today on 01733 555183 or email info@ptl-lettings.co.uk.
