So you think you have found the right place for you? Well, it’s time to start thinking about deposits.
Deposits are a hot topic when it comes to renting a place. The idea of handing over a lump sum of money to a letting agent or landlord can be daunting and should not be done lightly - even if you are in a real hurry to find a place.
There are effectively two types of deposit that come with your average rented property: The Holding deposit and the Security or Tenancy Deposit.
We have put together a neat guide to what you need to know when it comes to both. Hopefully, this will help you avoid losing any money and allow you to make a more informed choice on your journey to renting your next place.
What is a holding deposit?
They are used to cover the landlord for any costs incurred or any lost opportunity to market their property once you have said you would like to formally rent the property. The letting agent will now stop marketing this property so you are effectively paying to have an exclusive final decision on the property.
However, if the landlord is working with multiple agencies, then these other agencies may still market the property until it is let. If the offer is accepted by the landlord and the tenancy agreement is signed, then the holding deposit will often be deducted from the tenancy/security deposit (which we will discuss in a minute).
What if the landlord rejects your proposal?
The landlord can reject your offer to rent their property even after you have paid your holding deposit and before you have signed a tenancy agreement. But don’t worry, you will get your money back in full if they choose to reject your offer. Time to look for somewhere new though, unfortunately.
How about if you decide against the property after you have paid the holding deposit?
You may not get any of your holding deposit back if you decide not to go ahead with the property after you have paid it. So, definitely don’t pay this if you are not 100% sure that this is the property for you. Don’t feel pressured into paying a holding fee before you have had time to really consider whether you want the property.
Read the terms and conditions carefully when it comes to the holding deposit
They are slightly controversial and put the landlord under much less pressure at this stage of the negotiation. So just be sure you know everything there is to know about your particular deposit e.g how much it is, in what scenario you would lose it, when you would receive this money back or whether it comes out of your security deposit etc.
As we always say, the more informed you are about the contract the more comfortable you can be during the whole process.
Be sure to get a full receipt of the transaction.
To help avoid any future disputes, make sure this includes all of the important elements of the proposed tenancy agreement e.g rent, move in date, amount already paid & the refund rules etc. Pay through a bank transfer wherever possible to help make it even easier to track the payment.
Avoid the deposit altogether to avoid losing any money.
Despite them being fairly common practice, you can still avoid paying holding fees. So if you feel the holding fee is unnecessary for the specific property (perhaps there is not as much interest in that specific area) then you can ask to remove the holding deposit from the process.
This can depend heavily on the landlord and their previous experience. If you do manage to avoid a holding deposit, make sure you don’t mess the landlord about - remember that they are trying to fill the property in a timely manner too.
Tenancy Deposit / Security Deposit
What is the tenancy deposit?
This is a deposit that the landlord or agency will hold on to while you are renting the property. It usually equates to approx. 4-6 weeks of the rent. This deposit is very normal and it will need to be factored into your plans when looking for a property, as you will need to be able to pay this on top of your first month’s rent - which can be a bit of a shock.
You will hopefully get this full amount back at the end of your tenancy, so make sure you don’t do anything that might mean the landlord deducts from it.
Is my money safe?
If you are renting the property in relation to an Assured Short-hold Tenancy (AST) then the landlord will need to protect your security deposit in a government-authorised tenancy deposit protection scheme. (Be sure to have a read through our guide on how to avoid rental scams so that you know what to look our for.)
A deposit protection scheme means the landlord will not be able to spend your money and will need to have a fair reason for any of your deposit to be deducted. Just bear in mind that the landlord doesn’t need to do this if the landlord is living in the same accommodation as you and you are living there as a lodger.
Will you get your money back?
Once your tenancy agreement is over, you should receive your deposit back. As mentioned before, there may be deductions taken from this for what must be deemed fair reasons. This could be damage to the property, bills for any cleaning that was necessary after you have left the property, any outstanding rent or missing inventory. Read our tips on how to get your full security deposit back.
If something is deducted do not be surprised if you are billed the maximum amount possible for even a small amount of damage. However, any proposed deduction that you feel is excessively unfair or totally unreasonable can be appealed via a small claims court. Once this has been settled with the landlord, the deposit must be returned to you within 10 working days.
All-in-all the deposits are an important and necessary part of renting a property. As long as you stay on top of your rights as a tenant and treat the property with respect and as a home, then you can expect to receive your money back. Keep track of any damage and any repairs that are made, and take lots of photos when you move in, so you can clearly show if there was any damage before you moved in.
Let us know in the comments below if you have any tips or interesting experiences when it comes to deposits.