When an applicant is interested in securing a rental property and moving ahead with tenancy, the real estate agent will often request payment of a holding deposit.
The holding deposit removes the ability for the landlord or agent to enter into a lease agreement for that property with any other person within 7 days of the holding deposit being paid (or for a further period as may be agreed with the tenant).
However, there are some circumstances in which an applicant may have paid a holding deposit but after paying the deposit, finds that they are no longer able to or willing to proceed with tenancy. The applicant may have had a relationship breakdown with a potential co-tenant, an alternative property may have become available which is more preferable to them, etc.
In these cases the question arises - is the rental holding deposit refundable?
When Is A Holding Deposit Refundable To A Tenant?
The Residential Tenancies Act 2010 is very clear on the treatment of holding deposits (holding fees). In particular, Part 3 Division 1 Section 24 of the Act states:
So, once a holding fee has been paid, the landlord or agent cannot enter into a lease agreement with another applicant within the applicable timeframe after the payment has been made.
This is the key. The holding deposit can only be retained by the landlord or their agent if the tenant signs the lease agreement, or having paid the holding deposit chooses not to sign the lease.
In short, if the tenant pays a deposit then chooses not to proceed with signing the lease, the holding deposit is not refundable. However, there is one exception to this.
So, if the landlord or agent misrepresented the property or details of the agreement, or failed to disclose a material fact, the holding deposit must be returned to the tenant. (A material fact is defined as a fact that would be important to a reasonable person in deciding whether or not to proceed with a particular transaction).
Do you have a question about the management of your rental property? Contact us today.
Carnelian Property Management Newcastle NSW
We are a family-owned and run Newcastle real estate agent offering expert property management across Newcastle and Lake Macquarie.
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