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Do you take holding deposits?

A few weeks ago, we had a call from one of our landlords – they were asking if we take holding deposits for our HMO rooms.

The first stage of applying for a room is getting the prospective tenant to fill out a tenancy application form. 

This form allows landlords to obtain some basic information about the tenant, but more importantly asks for their consent to have referencing checks carried out on them.

 It also asks them to answer some specific questions and confirm that they understand certain things for example whether they have had a CCJ, and that they understand they must be able to show right to rent in the UK to be offered a tenancy.

By asking these things of the tenant first of all, landlords can assess the tenant and decide whether they are a suitable applicant. After this, the next step is to begin to reference the tenant and consider taking a holding deposit.

While the full details around holding deposits is beyond the scope of this article, holding deposits in England and Wales are capped at one week’s rent, and the standard time for either repayment of the deposit or the tenancy to begin is 15 days after taking the holding deposit, unless the parties agree to extend that, in writing in Wales.

The benefit of completing a tenancy application form first, is that if it turns out that the tenant has provided false or misleading information, this can be a reason to not have to repay the holding deposit and to pull out of the tenancy, potentially covering some of the landlord’s loss. If not entered into, the landlord has 7 days to inform the tenant of this in writing and to repay them, or not, as well.

Hopefully, of course, a tenant will have been found by that point, as the referencing process will highlight the best applicants. The holding deposit can then be converted into either a contribution to the first month of rent, or towards the security deposit.