Should the letting agent keep our deposit if they decide we can’t rent the house?

My friend and I put a deposit down on a rented house. We gave the estate agent the money and few days later we got a letter asking for a guarantor. We hadn't been told we'd need a guarantor and we couldn't find one. When we spoke to the agents they told us they wouldn't refund our deposit. The whole situation seems really out of order as it wasn't our fault we couldn't find a guarantor. We've lost £600, it's so much money and we can't afford to lose it. Are they in the right? Or are we entitled to a refund?

The first thing to know is that there are two types of deposit: a holding deposit; and a security deposit.

A holding deposit is money paid when you’ve agreed to rent a property, but haven’t signed a contract. If you pay a holding deposit you’re guaranteeing you’ll take up the tenancy. If the agents accept it they’re guaranteeing they’ll let the property to you. Usually a holding deposit is set against a security deposit, or is refunded when you move in. If the agreement is cancelled, and it’s not your fault, the holding deposit should normally be returned to you.

A security deposit is paid to the landlord as security in case you damage the property or don’t pay the rent. It remains your money, and should be returned unless the landlord can show they’ve suffered a financial loss.

If you paid a holding deposit, you’ll need to try to get this back from the agents. But if it was a security deposit the agents will have taken this on behalf of the landlord. You will therefore need to contact the landlord to try to get your security deposit back.

If you were given anything in writing, check what it says about the deposit and what it was for. If you were given a contract saying the deposit was non-refundable this may be an unfair term, depending on how it was worded in the contract. You may be able to challenge this. If this is the case, you can contact the Office of Fair Trading (OFT), an organisation that can advise on unfair terms.

If the estate agent didn’t mention the need for a guarantor before you paid the deposit they may be withholding it unfairly. If you think this is the case there are steps you can take to get the deposit back.

If you want to try to get the deposit back you should firstly try to negotiate. Ask the agents or landlord to put in writing their reasons for withholding the deposit.

You could also complain about the letting agent if you think they’ve acted unfairly. There are several bodies set up to regulate and handle complaints about estate/letting agents. These include the National Association of Estate Agents, the Association of Residential Letting Agentsand the National Approved Letting Scheme. If your estate agent is a member of one of these bodies you can contact the body to make a complaint.

If this doesn’t work, you could try to get the money back through the small claims court. This is quite straightforward but there’s no guarantee you’ll be successful. The more evidence you can gather, the stronger your case will be. The court would consider whether it was reasonable for the landlord or agent to keep the money.

You might want to get further help from a local advice service. An advisor may be able to help you negotiate with the letting agents or landlord, or help you make a claim in the small claims court.

Answered by Shelter on 06-Mar-2014

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