OpenRent Community

Can we deduct the cost of reference fees from holding deposit if the tenant fails?

With the impending tenant fee ban, will we be able to deduct the cost of reference fees from the holding deposit if the tenant fail their reference checks?

Hi there,

Once the tenant fee ban is in force, it won’t be possible to force tenants to pay for referencing regardless of whether they pass or fail.

So in the scenario you’ve mentioned (tenant applies, reference is declined, landlord rejects the application) the landlord pays for referencing and can’t deduct the cost from the holding deposit.

In case you haven’t seen it, we also have some useful information about the fee ban on our blog here:

https://blog.openrent.co.uk/tenant-fees-ban-what-landlords-need-to-know/

Thanks,
Simon

Thanks Simon, thought this may be the case.

Personally i think most of the fee ban is correct with the exception of the referencing costs. It does not feel right that when a tenant fails the reference, the landlord pays. We have already lost rental income waiting for referencing which more often than not they delay when they know it will fail.

I accepted a tenant and was waiting for her to sign the contract when emailed to tell me she can no longer rent the flat. Do I have to refund her the referencing cost -and the holding deposit?

There was talk on various property boards when this new law was first announced that landlords would start asking for verifiable, recent references from recognised agencies FROM THE TENANT.
This was one way of making the tenant pay the consequences of failing references.

I’m not sure I would be pointing prospective tenants at RentGuard and saying, “apply to them and show me the pass documentation so I can get RGI”, but I don’t like tenants that fail references.

In the past, before I got more savvy, I got quite a lot of failures; mainly from “chancers” that basically lied to me and wasted my time. This does nothing to stop those people and means I have to be more diligent BEFORE I start referencing.

In a couple of years I predict we will have to check the MOT on their cars as well :slight_smile:

From what I understand you can retain the holding deposit if the tenant withdraws from the property. You need to put it in writing as to why you are keeping the holding deposit within 7 days - as long as this is before the ‘deadline for agreement’.

Check out the full guide from the gov website which explains all the above: Tenant Fees Act 2019: guidance for landlords and letting agents

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Its against the law to impose a tenant to obtain a reference from a third party

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Thanks for these great answers, Oliver!

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The Tenant Fees Act seems to provide for the Landlord/Agent to retain the holding deposit where the Tenant provides misleading information which materially affects their suitability to rent the property (paragraph 9). To weed out Tenants who verbally mislead the Landlord about factual information, i.e. inflating their income/incorrectly stating they have no CCJs registered against them, could Open Rent ask the Tenants to confirm when paying the holding deposit that they earn a minimum of 2.5 times the rent and that they have no CCJs registered against them with a stipulation that if the reference is returned with information that contradicts this, the Landlord will be entitled not to proceed and to retain the holding deposit?