Taking a holding deposit for the rental of my house?

Question

Hi, i have my house up for rent. 2 Girls said they were taking it then let me down by phoning me 2 hours b4 coming to read over the lease etc.

The reason was that they were told by other people that this was a bad area , even tho i have lived here for 4.5 years on my own !!!

My question is, if i have more viewers who say they want it should i ask for a non-refundable holding deposit until lease is signed? I am doing this myself and not with an agent so i have all the documents i need already.

Many thanks.

Answer 1

Just a point - if you intend to do this without an agent you're entering a legal minefield.  Get a decent agent.  It'll cost a bit more but may well pay in the end.

Answer 2

You can ask. Have a lawyer put together a contract for the deposit. You don't want any loose ends.

Answer 3

If you have no contract with them how can you expect the to pay for nothing.  Another issue is you can't receive multiple payments for the same home.  You could charge a non-refundable application fee.  But if they qualify you will need to rent it to them, you can just go collecting fees and offering nothing for it.

Answer 4

Do not call it a holding deposit - call it a holding fee. People automatically think that deposits are totally refundable. Calling it a fee makes it clear that it is not.

You need to draft a holding fee agreement that spells out that:

If the tenant is denied the rental, the fee will be returned.

If the tenant is approved for the rental and fails to sign the lease/take occupancy the fee will be forfeited.

If the tenant is approved, signs the lease and and takes occupancy, the holding fee will convert to a security deposit.

Your applicants should sign and date this agreement when they put down the holding fee.

This way, the money is a fee (which you can keep as liqudated damages) until AFTER they have signed the lease and moved in.

Answer 5

I don't see why not,apartments do it all the time.Those girls were probably just flaky.

Answer 6

Have you considered where you are going to lodge your tenants deposit?

Answer 7

Yes, we always require an execution deposit or holding deposit when accepting applications, so we know an applicant is serious about renting the unit.  However, make sure you have an agreement that explains what the deposit is for (move-in date, rental terms, non-refundable, etc.).  It seems many applicants -- especially judging from the frequent questions on this board -- are unfamiliar with these types of deposits and believe they are refundable ('cuz I changed my mind', 'no longer moving', 'found a better place', etc.).  

Also, these deposits are usually refundable if you deny their applications.