After the Agent found a potential tenant who wished to move into the property immediately, Mrs E, the landlord, paid the existing tenant £500 to end the tenancy early. She did so on the assumption that the £500 holding deposit received by the Agent from the prospective tenant would mitigate her loss should the new tenancy not proceed. However, following the prospective tenant withdrawing due to personal reasons, the Agent kept the £500 holding deposit.
My examination of the Agent’s file found no record of any prior discussion about the holding deposit arrangements. Indeed, I found no terms and conditions recorded in in any agreement (or list of charges) be it between Mrs E and the Agent or between the Agent and the potential tenant. In the absence of this information, I based my decision on what I considered to be fair and reasonable in the circumstances.
I considered that if the prospective tenant had been asked, he would have thought he was paying £500 as a deposit to the landlord and not administration costs to the Agent. Mrs E had acted to her financial detriment on the assumption she could claim £500 if the tenancy did not proceed. The sum in question exceeded what might be considered reasonably intended to cover an agent’s administration costs. I pointed out that it was the Agent’s professional responsibility to clearly explain and record the holding deposit terms and to only withhold monies to cover their appropriate costs. However, in the absence of an agreement which entitled Mrs E to retain any of the deposit monies, I was unable to award her the balance of the holding deposit monies. Indeed, I directed the agent to return the balance of £350 to the prospective tenant. However, I considered that the Agent’s failure to ensure that the appropriate terms and conditions were put in place to enable Mrs E to claim on the holding deposit had caused her avoidable and unnecessary inconvenience, distress and aggravation. Accordingly, I made an award of £350.
In accordance with Paragraph 6g of the TPO Code of Practice, written terms and conditions relating to holding deposits must be provided to the prospective tenant prior to their offer being formally accepted and certainly before the point the monies are paid. Agents should also ensure that they follow OFT guidance and only retain monies for reasonably incurred costs. If monies are to be passed to the landlord in the event of a tenant withdrawing, this must also be detailed in the terms and conditions of the holding deposit arrangement.