To Whom Does a Forfeited Rental Holding Deposit Belong?

scoobydoobydu on 13/02/2019 - 16:02

Brief background facts:

  • We listed our apartment for rent with a local real estate agency
  • After the first viewing, a number of applications were received and the strongest application was chosen
  • Applicant paid a rental deposit equivalent to one weeks' rent to secure the property (not the bond, just a holding deposit)
  • A couple of days later the applicant advises they can't go ahead with signing the rental agreement and forfeits the holding deposit.

Question - To whom does this rental deposit belong? Should the agent be paying this rental deposit to us (less the agents' fee) or is this for them to keep?

We have subsequently rented out the property to another applicant and expect to receive the first month's rental payment in a few weeks' time. I just want to confirm whether we should also expect to receive the forfeited holding deposit of the first applicant as well?

The lease agreement states that any holding deposit will be applied as a credit towards the first month's rent which would infer to me that this money belongs to us and not the agent.

Financial Rental

Comments

  • Seraphin7 on 13/02/2019 - 16:09
    +3

    Absolutely you as landlord should be receiving this holding deposit less any charges/expenses previously agreed with your agent.

  • HighAndDry on 13/02/2019 - 16:10
    +1

    Depends on what you signed with the agent. The holding deposit technically belongs to you at first, but your agency agreement may well have the agent charging you one week's rent for having a prospective tenant get to that stage of the process, even if they don't ultimately rent it. Check your agreement.

    The lease agreement states that any holding deposit will be applied as a credit towards the first month's rent which would infer to me that this money belongs to us and not the agent.

    Not really relevant - I'm sure at least one or two weeks' of the first month's rent goes to the agent as their letting fee anyway.

    • scoobydoobydu on 13/02/2019 - 16:18

      But that would only apply if the agent successfully lets out the property - which means a tenant would have had to sign the lease agreement. Given the first applicant never signed the agreement we would argue the property was never let, ergo agent should not be entitled to the letting fee?

      • HighAndDry on 13/02/2019 - 16:24
        +2

        Depends what your agreement says - it could be that the agent is entitled to a fee for getting a prospective tenant to put in an application that you accept. So read your agreement.

  • whooah1979 on 13/02/2019 - 17:37

    OP, in which state is this?

  • stevednj48 on 13/02/2019 - 17:40
    -2

    Because he did not sign he can get his deposit back from the person holding it
    If he had of signed then it would be forfeited to either you or your rental agency depending on agreements in the paperwork.
    but i think it is also state dependent on rules

    • HighAndDry on 13/02/2019 - 17:57
      +1

      Because he did not sign he can get his deposit back from the person holding it

      We just hashed this in the other thread, it could be a holding deposit that the prospective tenant would lose on pulling out of the lease.

      • scoobydoobydu on 14/02/2019 - 07:29
        +1

        This. The applicant pays the holding deposit to secure the property. By payment of this deposit, the agent can tell the other applicants that their applications were unsuccessful. This is a potential cost to the landlord because they are turning away applicants who may otherwise be qualified to rent the premises. Therefore if you commit to a place by paying a holding deposit that deposit will be forfeit if you subsequently pull out (as the property will need to be put on market for another viewing).

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