Call of the Month: The Tenant Fees Act and holding deposit rules

It has been four years since the introduction of the Tenant Fees Act in England.

This month we focus on a recent call from a member who was remarketing their property for the first time in five years.

They had several prospective tenants interested in viewing the property, and gave us a call because they wanted to understand what the law now says around charging a holding deposit and when that deposit can be retained.

The situation

Our landlord had conducted viewings of his single-let property earlier in the week, and had a prospective tenant lined up.

The landlord had taken a holding deposit of one weeks’ rent from them to secure the property.

However, the tenant had got in touch to say they no longer wanted the property as they had now found a rental property even closer to their place of work instead.

The prospective tenant had asked for the landlord to return the holding deposit they paid immediately, stating they need to do this in a week by law.

Our landlord wasn’t aware of this requirement. To be sure of their legal position, they gave our advice team a phone call to ask what to do.

Our advice

Our advice team often receive calls around holding deposits and the Tenant Fees Act, and our expert adviser was only too happy to advise our landlord in this case. 

They explained that quite often where the tenancy does not go ahead, for example if a landlord had ‘pulled out’ of the tenancy, then the holding deposit money must be repaid in full within 7 days of that happening. 

However, in some cases, the holding deposit doesn't have to be returned. 

The landlord is entitled to keep the holding deposit if: 

• the applicant backs out before the tenancy agreement is granted; 
• the applicant fails right to rent checks and it was not reasonable for the landlord or agent to know they would fail; 
• the applicant has provided false or misleading information which would impact on the decision to let the property to them; 
• the landlord tries their best to get the information needed to proceed, but the applicant fails to provide it within 15 days; 

Our advice team said that the landlord would not need to return the holding deposit in this scenario, as it had been the tenant who had decided to back out before the tenancy had been granted. 

They also said that it is important for landlords and agents who wish to retain a holding deposit to ensure they have taken appropriate steps beforehand, for instance have written evidence that any affordability or similar criteria were clearly explained to the applicant.

Our landlord was grateful he was able to pick up the phone and double-check and said he’d take a look at the NRLA’s guidance for more information around holding deposits first before making a decision.

Separate guidance on the fees ban in Wales is also available on the NRLA website for landlords to read here.