Holding Deposit Agreement

Letting Agent’s Holding Deposit Agreement for AST (Wales)

PROP.EST.95

This Letting Agent’s Holding Deposit Agreement is for use by a letting agent in Wales when collecting a holding deposit prior to entering into an assured shorthold tenancy agreement on behalf of the landlord. The letting agent must have the authority and consent from the owner of the property prior to entering into this agreement on its behalf.

This Template Agreement acknowledges receipt of a holding deposit, it confirms that the letting agent will not let the property to any other person until this agreement is cancelled or expires (and the tenancy agreement 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”) (which affects Wales only) introduced new rules regarding holding deposits in Wales. Not all agents collect holding deposits 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 to be collected from prospective tenants to reserve a property. A letting agent must not collect more than one week’s rent. If a letting agent collects more than one week’s rent, this 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 week’s rent, the monthly rent should be divided by 4.35.

Under the Act a holding deposit must be refunded within 7 calendar days of the tenancy being entered into (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 tenancy deposit protection scheme.

If the parties (acting reasonably) fail to enter into a tenancy agreement within 15 days of receipt of the holding deposit paid by the prospective tenant(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 tenant before the holding deposit was paid. The prescribed information and the way in which it must be provided will be specified in future regulations. The Welsh Government have powers to make regulations on the prescribed information in the future.

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.

Agents will also not be able to evict a tenant on behalf of the landlord using the section 21 eviction procedure to regain possession until they have repaid an unlawfully retained holding deposit.

There is a Landlord’s Holding Deposit Agreement (Wales) which can be used by landlords collecting holding deposits and it can be found in the New Tenancy Forms, Letters and Checklists for Residential Landlords subfolder.

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