Holding Deposit/Fee of Intent
Complaint
Miss E (the Prospective Tenant) claimed that the failure of the Agent to advertise the property correctly and to represent both her and the landlord properly caused her to withdraw from the tenancy. Miss E requested a full refund of the £1,000 she paid to the Agent to ‘hold’ the property. The Agent responded stating that the property had been advertised correctly, that the monies represented a ‘fee of intent’ (not a holding deposit) and that, as she had withdrawn from the transaction, her payment would not be returned.
Investigation
Neither party provided any evidence to support their claims concerning the property advertisements. However, a signed ‘fee of intent’ agreement was produced which recorded that the £1,000 payment would go towards one months rent, the security deposit and administration fees, but could be forfeited upon the prospective tenant withdrawing from the transaction. Both parties’ submissions also indicated that Miss E had withdrawn from the transaction before the landlord had responded to a number of her requests.
Outcome
As Miss E had withdrawn from the proposed tenancy, I considered it fair that she should be expected to incur some financial cost. However, as the ‘fee of intent’ document stated that part of the £1,000 was for rent and the security deposit, given that the tenancy did not reach fruition, I considered that Miss E had neither a rent nor a deposit liability. As such, I did not consider it fair for the full £1,000 to be retained. As the Agent’s file detailed their administration fee (which included referencing costs) at just over £500, I directed them to refund the difference to Miss E to resolve the dispute.
Learning
Where a holding deposit has been taken for a prospective tenancy, the purpose of that deposit, and what deductions will be made if the tenancy does not proceed, must be clearly stated, in writing, by the agent, prior to receiving payment. Deductions for administration, referencing and other fees should be reasonable. However, it is unreasonable for deductions to be made in relation to rent and the security deposit if the tenancy does not proceed.