Has your landlord held you to ransom with your holding deposit?

Like many other renters, when I moved to London I agreed to pay a holding deposit (of £500) to an agent to secure a flat I had viewed.

Before I paid, we set down in a one-page document the basic terms – the amount of rent and fees, the length of the tenancy, and the move-in date, which the agent relayed to the landlord.

Days later, I discovered that the property was still listed as available and that the landlord was considering a higher rental offer from another prospective tenant. I was told I would either have to match the higher rent, or walk away from the tenancy.

No bargaining power?

Walking away wasn’t an option: I had already set the move-out date with my previous landlord, I had turned down another flat, and my future flatmates (my brother and his wife) were on a plane from Australia expecting to move into our new home when they landed.

Despite my protests, neither the landlord nor the agent saw the holding deposit agreement as legally binding.

In the end, after passing reference and credit checks, I was presented with a redrafted tenancy agreement. This rewrote all of the terms that had originally been agreed and, to my mind, only benefitted the landlord. I signed, reluctantly, reiterating my protest, and we moved in.

Holding deposit agreements are contracts

I struggled to find any firm guidance on the legal effect of paying a holding deposit. Being an academic lawyer, I did my own research and published an article on the pre-tenancy obligations and rights of parties to holding deposit agreements.

Unsurprisingly, the landlord wasn’t interested in my article or my claim that imposing higher rent and extra fees had been in breach of contract.

That is, until we moved out when I filed a breach-of-contract claim in the County Court. Rather than contest the case, the landlord admitted it and paid my claim immediately. My siblings and I received a full refund of our over-charged rent and fees (with interest).

See you in court?

Each case will turn on its particular circumstances. Whether the payment of a holding deposit creates a binding contract depends on what was agreed (either verbally or in writing) when it was paid.

I felt I had a strong case since we had a written record of our holding deposit agreement, I always disputed the landlord’s attempts to ‘renegotiate’ the tenancy terms, and I kept a record of conversations (emails, texts, etc) with the landlord and agent from the start.

As a lawyer, the prospect of going to court was more familiar to me than most. But even for a lay person, the process may be less daunting than it seems, with useful guidance on the government’s site.

This is a guest post by Sam Beswick. All views are Sam’s own and not necessarily those also shared by Which?.

Has your landlord or their agent used a holding deposit as leverage against you? Did you walk away from the tenancy, or did you end up going through with it and paying higher rent? Have you looked into your rights? Have you ever thought to sue over a breached holding deposit agreement? Or do you know someone else who this has happened to?