From 1 September 2019, under the Renting Homes (Fees etc.) (Wales) Act 2019, a “holding deposit” is a permitted payment.

But, there is a very specific procedure to be followed when handling holding deposits.

benjamin-ranger-45d0RkXa5jM-unsplash

A holding deposit of a maximum of one week’s rent is a permitted payment under The Renting Homes (Fees etc.) (Wales) Act 2019.

A Holding deposit is defined as an amount which:
before the grant of a standard occupation contract or AST, is paid to a landlord or a letting agent;is paid for the purpose of reserving a right of first refusal in relation to the granting of the contract,subject to suitability checks to be carried out as to the prospective contract-holder and agreement between the parties to enter into the contract;does not exceed an amount equivalent to one week’s rent under the contract

Unfortunately, there’s no legislated calculation for finding one weeks rent but the official guidance suggests dividing the calendar monthly amount by 4.35. Remember this is a “maximum” amount so you must round down for this calculation
.

  • Only one holding deposit can be taken per property (because the payer must be given the first refusal).

Prescribed Information
When receiving a holding deposit from a prospective tenant, from the 13th of December 2019, prescribed information must be given to the prospective tenant BEFORE a holding deposit is received.

The information required is:

  • Amount of holding deposit (which is limited to no more than one weeks rent)
  • Identify the dwelling in respect of which the deposit is paid
  • Name, address, telephone number and any e-mail address of the landlord (and if instructed, the letting agent)
  • Nature and duration of the contract
  • Proposed occupation date
  • Amount of rent or other consideration
  • Rental period
  • Any proposed additional contract terms or proposed modifications or exclusions to fundamental or supplementary terms
  • Amount of any security deposit
  • Whether a guarantor is required and, if so, any relevant conditions
  • Reference checks the landlord (or letting agent) will undertake
  • Information the landlord or letting agent requires from the prospective contract-holder

A failure to provide the prescribed information results in the holding deposit having to be returned even if there is some reason allowing a landlord or agent to retain the holding deposit (except if the tenant has provided false information).

Deadline for Agreement

Like England, there’s a “deadline for agreement” which is the date by which the holding deposit must have been repaid in one form or another.The default date is 15 days beginning with the day on which the holding deposit is paid.
But, this date can be changed and the period extended by an agreement “in writing” between the parties.

Repayment of Holding Deposit

The default position is that the holding deposit must be repaid.
The person who received the holding deposit must repay it if—

  • the parties enter into the contract before the deadline for agreement and in this case it must be repaid within 7 days of the contract being made
    or
  • the parties fail to enter into the contract before the deadline for agreement and in this case, it must be repaid within 7 days of the deadline for agreement date.

In respect of repaying where a contract has been entered into “before” the deadline for agreement date, it’s acceptable for the holding deposit amount to be applied towards the first payment of rent or the security deposit.

If all or part of the holding deposit is applied towards the security deposit, the amount applied is treated as a tenancy deposit being received on the date the contract is made.

When the Holding Deposit Can Be Retained

There are a number of exceptions to repaying the holding deposit allowing the landlord or agent to retain it.

The tenant provides false or misleading information
The landlord or letting agent may retain the holding deposit if the prospective tenant provides false or misleading information to the landlord or letting agent and:

the landlord is reasonably entitled to take into account the difference between the information provided by the contract-holder and the correct information in deciding whether to grant a contract to the contract-holder,

or

the landlord is reasonably entitled to take the contract-holder’s action in providing false or misleading information into account in deciding whether to grant such a contract.

Remember if the prescribed information has not been given in accordance with the regulations which are as yet to be published, even if the above is a reason to retain the holding deposit, it will nevertheless have to be repaid.

The Prospective Tenant Has Decided Not to Enter Into a Contract
If the prospective tenant notifies the landlord or letting agent “before the deadline for agreement” that they have decided not to enter into a tenancy, the landlord or agent may retain the holding deposit (but only if prescribed information is given).

Landlord or Agent Takes All Reasonable Steps to Enter Into a Contract
Where the landlord or letting agent takes all reasonable steps to enter into a contract before the deadline for agreement but, the contract-holder fails to take all reasonable steps to enter into a contract before that date, the holding deposit may be retained by the landlord.

Again, this is subject to the prescribed information being given.

The full Act can be found here