A London-based letting agency has been found guilty of unlawfully charging a holding deposit far exceeding the legal limit, following a dispute earlier this year. The case, which involved Bal Real Estate Ltd in Tooting, South West London, was brought to light after the agency failed to refund the full deposit when a tenancy agreement fell through.
Holding deposit far exceeded legal limits
The controversy began when Claire Steffer, a prospective tenant, was asked to pay a £1,000 holding deposit to secure a room in a first-floor flat in Tooting, where the rent was advertised at £1,400 per month. This amount significantly exceeded the one-week rent cap on holding deposits as stipulated by the Tenant Fees Act 2019.
As the tenancy start date approached, Steffer repeatedly sought a formal contract from the agency. Eventually, a contract was sent, but it was riddled with errors, including a mismatch in the contract duration (six months instead of 12), the wrong start date, and an excessive security deposit request of £3,576—far above the legal five-week limit.
Agency admits breach, but partial deposit retained
Pritpal Singh Bal, the sole director of Bal Real Estate Ltd, acknowledged the mistakes and admitted that the £1,000 holding deposit was in violation of the Tenant Fees Act. Despite this, he returned only part of the deposit, retaining £323 as the equivalent of one week’s rent, after Steffer and her partner withdrew from the tenancy due to the errors.
Steffer, unsatisfied with the partial refund, pursued the matter through a Property Tribunal, seeking the return of the remaining deposit.
Tribunal rules in favour of tenant
The tribunal ruled that Bal Real Estate Ltd must return the remainder of the deposit, criticising the agency’s handling of the tenancy process. The tribunal stated, “It was not reasonable for the landlord/letting agent to delay issuing the tenancy agreement, and when it was issued, just before the deadline, for it to be in a form that could not be signed by the tenant.”
The judgement further noted that Steffer had made reasonable efforts to enter into the tenancy agreement, and the delays and errors on the part of the agency were unjustifiable.
This case serves as a stark reminder for both landlords and letting agents to adhere strictly to the legal guidelines set out by the Tenant Fees Act 2019, ensuring transparency and fairness in their dealings with tenants. For UK landlords and property investors, the ruling underscores the importance of compliance to avoid legal disputes and potential financial penalties.
