Holding Deposit Agreement for Occupation Contract (Wales)
This Holding Deposit Agreement for Occupation Contract is for use by a landlord or letting agent in Wales when collecting a holding deposit prior to entering into a standard occupation contract. Letting agents must have the authority and consent from the owner of the property prior to entering into this agreement on its behalf.
Holding deposits can only be collected provided certain specified written information is first supplied to the prospective contract-holder to enable them to decide whether they wish to proceed with the proposed occupation contract and pay a holding deposit. This template agreement incorporates the requirements relating to the specified information which must be supplied.
The Agreement acknowledges receipt of a holding deposit, it confirms that the property will not be let to any other person until this agreement is cancelled or expires (and occupation contract has not been entered into) and it sets out when the holding deposit is to be repaid and retained.
The Renting Homes (Fees etc.) (Wales) Act 2019 (“the Act”) introduced new rules regarding holding deposits in Wales. Holding deposits are not always required but if one is collected, it is a good idea to have a written agreement.
The Act introduced a cap on the amount of a holding deposit that could be collected from prospective contract-holders to reserve a property and no more than one week’s rent can be retained. If more than one week’s rent is collected, it will be a prohibited payment and the agent will be in breach of the Act. Guidance published by the Welsh Government states that in order to calculate the maximum holding deposit, the monthly rent should be divided by 4.35.
Under the Act a holding deposit must be refunded within 7 days of the date the occupation contract begins (although there is provision for the holding deposit to be applied to the first instalment of rent or towards any permitted security deposit). If the holding deposit is to be applied to the security deposit, then this must be protected within a government approved deposit protection scheme.
If the parties (acting reasonably) fail to enter into an occupation contract agreement within 15 days of receipt of the holding deposit paid by the prospective contract-holder(s) (‘the Deadline for Agreement’) (unless an extension is agreed), the holding deposit must be repaid within 7 days of the Deadline for Agreement.
The template agreement lists the specific circumstances when the holding deposit can be retained. If a landlord or letting agent wants to rely on the exception to repayment, certain information must have been provided by the letting agent (or landlord) to the contract-holder before the holding deposit was paid.
Any breach of the Act is an offence and is prosecutable in the magistrates’ court and the offender will be liable to a fine (not subject to a statutory limit). The enforcement authority may offer the offender a civil fixed penalty of £1000 for certain offences as an alternative to prosecution but this is entirely at its discretion.
It is not possible to evict a contract-holder by way of sections 173 and s186 notices or a landlord’s break clause until an unlawfully retained holding deposit has been repaid to the contract-holder.
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