The process of finding tenants, verifying their suitability, and carrying out the appropriate reference checks can be time-consuming and stressful for both property managers and tenants alike. As a property manager, you may choose to take a holding deposit to secure the property while the referencing and contract-signing process takes place. This provides a degree of peace of mind for tenants, too, as it temporarily secures the property for them while the checks are being carried out.
In this guide, we answer all your questions about holding deposits, including when you can take them, how much they should be, when to return them, and more.
What is a holding deposit?
A holding deposit is paid by tenants to a property manager to reserve a property before the tenancy agreement is signed. The sum of money essentially acts as a tenant's commitment to renting the property. In return, property managers take the property off the market while they check the prospective tenants' references.
How much is a holding deposit?
Legally, property managers can charge no more than one week's rent as a holding deposit. This regulation prevents excessive financial burdens on prospective tenants.
When can you take a holding deposit?
After prospective tenants have expressed interest in your property, you can charge a holding deposit. You should provide clear information about why you are taking the holding deposit and share a draft tenancy agreement while you conduct reference checks, such as verifying the tenant's identity, ability to pay rent, and right to rent.
When should you return a holding deposit?
If tenants pass their referencing and right to rent checks, you should either return the holding deposit, convert it to a tenancy deposit, or apply it to the first month's rent. It's crucial to note that holding deposit agreements should never declare the deposits as 'non-refundable'. Part 2 of the Consumer Rights Act 2015 deems this an unfair term.
When can you keep a holding deposit?
It is essential that you create a written holding deposit agreement and ensure it is signed by both parties. In your holding deposit agreement, you can lay out the specific circumstances under which the property manager can retain the holding deposit. For instance, this might occur if the tenant decides not to rent the property, provides false or misleading information, or fails a right to rent check.
Request holding deposits through Concurrent
By adhering to legal guidelines and maintaining clear communication with prospective tenants, you can ensure a smooth and fair holding deposit process for both parties involved.
Concurrent makes it easy to request a holding deposit when creating a manual tenancy in the platform. Tenants will be required to pay the holding deposit before they can access and sign the tenancy. Want to find out more? Book a Concurrent demo today.