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June 2019

The Tenant Fees Act 2019 (“the Act”) introduced various new rules concerning holding deposits in England. Holding deposits can be collected by landlords or letting agents to reserve a property prior to completing a tenancy agreement.

Not all landlords/agents collect holding deposits but if one is collected, the Act highlights the importance of having a written agreement to make it clear to the prospective tenants when the deposit is to be repaid or the circumstances when it can be retained.

There is a new Landlord’s Holding Deposit Agreement for AST (England), and a new Letting Agent’s Holding Deposit Agreement for AST (England). These are for use by private sector landlords and letting agents in England when a holding deposit is collected prior to entering into an assured shorthold tenancy agreement.

These Template Agreements acknowledge receipt of a holding deposit, they confirm that the landlord will not let the property to any other person until these agreements are cancelled, or expired (and the tenancy agreement has not been entered into) and it sets out when the holding deposit is to be repaid and retained.

Collecting a sum which exceeds the cap for holding deposits and not repaying the deposit when it is due will result in a breach of the Act.

Landlords and letting agents can be subject to a fine of up to £5,000 for a first offence. If a further offence is made within five years of the first, this will be a criminal offence and a landlord could be liable for an unlimited fine. Some local authorities may impose a financial penalty of up to £30,000 as an alternative to prosecution.

Landlords and letting agents will also not be able to evict a tenant using the section 21 eviction procedure to regain possession of a property until an unlawfully retained holding deposit has been repaid.

The Renting Homes (Fees etc.) (Wales) Act 2019 which is due to come into force on the 01 September 2019 contains similar provisions regarding holding deposits. A specific holding deposit agreement for use in Wales will be produced prior to this act coming into force.

The contents of this Newsletter are for reference purposes only and do not constitute legal advice. Independent legal advice should be sought in relation to any specific legal matter.

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