Holding Deposits
If you are interested in renting a particular property from a landlord or letting agent, you may be asked to pay a holding deposit to secure the property if it is not immediately available. The holding deposit is usually a nominal amount and should be deducted from either the security deposit or the first month's rent that will be payable when you move into the property.
It is fairly common for landlords and letting agents to request a holding deposit but this practice is arguably illegal as the holding deposit could be regarded as a 'premium'. Premiums are defined as any money which has to be paid additional to the rent in order to secure a property. Section 82 of the Rent (Scotland) Act 1984 and Section 88 of the Housing (Scotland) Act 1988 prohibit landlords and letting agents from requiring tenants or prospective tenants to pay premiums.
If however, you find yourself in a position where a landlord or letting agent asks you to pay a holding deposit and you are happy to do so in order to secure the property, you should consider the following points;
- The landlord or agent should provide a written document or contract which explains what the holding deposit is for and any terms and conditions as appropriate. Landlords are not allowed to use unfair contract terms such as a statement that says that all of the holding deposit will be forfeited if the prospective tenant decides not to accept the tenancy.
- You should avoid paying a holding deposit with cash - credit card or cheque is preferable. The landlord should provide a receipt, regardless of the payment method used.
- If you have paid a holding deposit and subsequently decide not to take on the tenancy, the landlord is likely to try to retain your holding deposit to offset costs and losses. In most cases however, landlords can only legally retain an amount that is equivalent to the reasonable cost of re-advertising the property. Landlords cannot retain your holding deposit to offset rent loss whilst the property is empty.
- If the landlord subsequently decides not to let the property to you for whatever reason then all of the holding deposit must be returned.
- If the landlord has failed to get you to sign a contract which outlines the terms and conditions of the holding deposit, then there are no grounds for the retention of the holding deposit if either party changes their mind.
- If the landlord changes any of the terms and conditions of the offer of tenancy after the holding deposit has been paid and you decline the tenancy in view of these changes, all of the holding deposit must be returned.
