In This Guide

Administration

   1. Holding deposits

   2. Referencing tenants

   3. Credit checks and guarantors

   4. The inventory

   5. The bond and rent

   6. Landlord's checklist

Being a landlord

Buy to let investment

Choosing the property

Finding tenants

Letting property

Lettings agents

Levels of service

Preparing the property

Problem tenants

Tenancy

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Administration

Holding deposits

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Your lettings agent will almost always take a holding deposit from the prospective tenant as soon as you have accepted their offer on a property. This is kept in place while the remainder of the administrative activity is carried out. If there is no lettings agent involved, you can still take one. It is basically a disincentive to the tenant making multiple offers at the same time and causing landlords and lettings agents a costly waste of time.

Holding deposits can range in value from as little as twenty-five or fifty pounds, right the way through to as high as several hundred pounds. This payment must 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 month's rent and the deposit due, both of which are payable before the tenant moves in.

However, there are a number of scenarios that may result in the holding deposit being withheld from the tenant. You should be clear with your lettings agent who gets to keep what proportion of the holding deposit should any of these situations arise. The lettings agent will normally have incurred certain expenses by the time the application is aborted, so will be entitled to a share of the holding deposit, if not all of it.

Tenancies fail to proceed for a host of different causes and tenants can have a change of heart for one of millions of reasons and withdraw their application. If the tenant pulls out of the deal for any reason, before the signing of the tenancy agreement, you are normally entitled to keep the holding deposit. That is, after all, its purpose!

You also get to keep the holding deposit if the tenant is rejected by the referencing company or fails to meet some other criteria you or the letting agent have set and which they were made aware of when they made their original application.

However, if you decide not to proceed for any reason that the tenant was not warned about, then you will have to give the holding deposit back. Deciding not to let the property, taking a dislike to the tenants or to the lettings agent and accepting a higher offer of rent from other tenants are all actions that would call for you to return the holding deposit.

Grey areas surround incidences of where landlords or agents have been less than truthful in an attempt to get tenants into a property. If tenants agree to move in, pay their holding deposit and then find something that the agent or the landlord either lied about or should have told them, which subsequently forces the tenant to change their mind about the place, then you should return the deposit. Some landlords and lettings agents don't, but this is bad practice.

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