How much do you collect as a holding deposit/fee, and what do you call it?

17 Replies

Curious what other landlords do for a holding deposit/fee so that they will take their ad off the market, before the new tenant moves in.  Do you require it to equal one month's rent?  Half a month's rent?  Some other amount entirely?

Also, what do you call it?  Is it a "non-refundable fee" that gets credited toward rent?  Or toward the security deposit?  Do you just call it a "deposit"?  Do you call it "prepaid rent"?  How do you make clear that it's non-refundable (or is only refunded if you can re-rent it)?

I'm sure some of this depends on what's legal in your state.

I call it a holding deposit agreement which goes towards the rental deposit when the tenant moves in.  If the tenant does not move in on the move in date a $200 fee is deducted and a daily fee until the unit is rented.  You shouldn't have to hold a place to long in Orange County, vacancy levels are low right now and the demand is high.  

I'm actually in the middle of this now.  When the tenant wants to claim tenancy for a unit early, I ask for the security deposit before I'll agree not to rent the unit to anyone else.  I don't officially "take it off the market" because I don't execute a lease until I receive both the deposit and the first month's rent.  If they pay both, I'll stop showing the unit.

Until the tenant pays both the deposit and the first month's rent, I continue to show the unit to other potential applicants.  I tell the other potential applicants that an applicant has paid the deposit, but that if that applicant doesn't follow through and complete the process I will be happy to consider the new potential applicant if they want to fill out an application.  The only real downside is when a later new applicant turns out to be a better potential tenant (on paper) than the one who has locked up the house.  That drives me a little crazy.

I've learned to never take a unit off the market until I have both the deposit and first month's rent.  You never know what a potential tenant will do. 

If a potential tenant pays the security deposit early to hold the unit, but then backs out, I consider the paid deposit to be forfeited as the rent payment for that first month.  If I'm able to rent the unit out before the end of the month, I'll refund a pro-rated portion back to the applicant who paid but backed out.

@Chris G. , I like the designation of it as a holding fee.  And I like the $200 fee for canceling, with the daily charge to account for pro-rating in the event of renting it again quickly.  I'll have to check into the legality of that in NC.

@Kimberly T.

I have not held a holding deposit for move-in; however, I got burned on the last place we rented out when we did not charge a holding deposit and that prospective tenant canceled at the last minute.

I have read that there really is not an amount to require, or hold. In The California Landlord's Law Book: Rights & Responsibilities, they state that within the laws of California there is really no clear and outlined amount to keep in regards to the damages that a landlord would face if they lost that prospective tenant. The book does not recommend the practice because the ambiguity of the situation and how little it holds up in court.

It's up to you if you feel comfortable getting that money to hold the house/unit.

Good Luck,

Peter 

I take the security deposit and first months rent WHEN THE KEYS ARE HANDED TO THE TENANT and the lease starts.

I will hold a client for 1 week prior to that and the fee is equal to one weeks rent equivalent. it's non-refundable and is a separate cost. I will keep taking apps, but no credit/background checks if the unit is on hold. 

nothing gets held without cash in hand. The key is to be ethically/morally upstanding but preparing that the prospective tenant won't be. 

We use a holding deposit, usually a half month's rent, and I typically advertise to fill a vacancy 2-3 months or more before the current tenant moves out.  I used to charge less- $200- but honestly it is a pain to put something back on the market since chances are all the people who were originally interested moved on when you took the place off the market.  

The Holding Deposit is deducted from the move in costs (I collect first month's rent and security deposit at or before move in) unless they change their minds about the apartment, then I keep the deposit.  If for some reason I was unable to rent to them, I would return the deposit.  

Thanks for everyone's thoughts.  We generally have been calling it a "holding deposit" here in CA, and stating that it will be credited toward the first month's rent.

For CA, the Dept of Consumer Affairs has a section on it in their landlord tenant handbook:

HOLDING DEPOSIT
Sometimes, the tenant and the landlord
will agree that the tenant will rent the unit, but
the tenant cannot move in immediately. in this
situation, the landlord may ask the tenant for a
holding deposit. A holding deposit is a deposit
to hold the rental unit for a stated period of
time until the tenant pays the first month’s rent
and any security deposit. during this period, the
landlord agrees not to rent the unit to anyone
else. if the tenant changes his or her mind about
moving in, the landlord may keep at least some
of the holding deposit.
Ask the following questions before you pay a
holding deposit:
• Will the deposit be applied to the first month’s
rent? if so, ask the landlord for a deposit
receipt stating this. Applying the deposit to
the first month’s rent is a common practice.

  • Is any part of the holding deposit refundable
    if you change your mind about renting? As
    a general rule, if you change your mind, the
    landlord can keep some—and perhaps all
    —of your holding deposit. the amount that
    the landlord can keep depends on the costs
    that the landlord has incurred because you
    changed your mind—for example, additional
    advertising costs and lost rent.
    You may also lose your deposit even if the
    reason you can’t rent is not your fault—for
    example, if you lose your job and cannot afford
    the rental unit.
    If you and the landlord agree that all or part of
    the deposit will be refunded to you in the event
    that you change your mind or can’t move in, make
    sure that the written receipt clearly states your
    agreement.
    A holding deposit merely guarantees that the
    landlord will not rent the unit to another person
    for a stated period of time. the holding deposit
    doesn’t give the tenant the right to move into
    the rental unit. the tenant must first pay the
    first month’s rent and all other required deposits
    within the holding period. otherwise, the landlord
    can rent the unit to another person and keep all
    or part of the holding deposit.
    Suppose that the landlord rents to somebody
    else during the period for which you’ve paid a
    holding deposit, and you are still willing and able
    to move in. the landlord should, at a minimum,
    return the entire holding deposit to you. You
    may also want to talk with an attorney, legal
    aid organization, tenant-landlord program, or
    housing clinic about whether the landlord may be
    responsible for other costs that you may incur
    because of the loss of the rental unit.
    If you give the landlord a holding deposit when
    you submit the rental application, but the landlord
    does not accept you as a tenant, the landlord
    must return your entire holding deposit to you.
  • One month's rent called a holding fee and the holding agreement specifically states that the entire fee is forfeited if they do not fulfill their end of the contract. The holding fee then fully credits the deposit if they fulfill the move in requirements.

    For NC residents, be careful with using the term "deposit" without a fully executed lease. If the person who paid the "deposit" asks for it back and they take you to small claims court, (you as defendant, the applicant as plaintiff) I have seen the plaintiff prevail. My experience is in Wake county (via now 'retired' Judge P******,) so your milage may vary based on county and judge. Note that in one case I saw, the plaintiff filed a money owed suit where there was not a fully executed lease. The "deposit act" and landlord/tenant statute were not applicable.

    That's why the topic @Steve Babiak linked is good for NC residents to consider.

    Seems to me the CA "Holding Deposit" may be a good remedy, assuming there are statutory guidelines on its implementation. I don't know of an NC equivalent. We obviously made our own. Seems like NC (and probably other states) could use one. The NC legislature did "fix" the accepting partial rent payment issue (HB 493, signed 6/11/2012) that is now 17(d) of the "standard" NC lease. So maybe the NC legislature will address the "Holding Deposit" someday.

    I'm not really sure what the point of taking a holding deposit is.  I keep marketing a home and accepting applications until the lease is signed and the security deposit is paid.  I don't collect the first month's rent until right before they move in.

    I have seen other companies collect a holding fee, but I'm not sure that I see any benefit.

    @Kimberly T. Hi.  I know this is an old thread but could you maybe give an example if I was going to rent out a unit for $900.00 a month.  I'm having trouble rapping my head around these numbers for some reason.  I was planning on charging $900.00 for first months rent and $900.00 for deposit.  If they needed a holding agreement I was going to hold $200.00 non-refundable and when them moved in add that to the deposit.  So they would then pay $900.00 for first month and $700.00 toward deposit, because they already paid $200.00 bringing a total of $1800.00.  Does this seem standard and correct.  Again thank you so much for your help in advance. 

    We have a holding fee and deposit - it's called "first/last month's rent & security deposit". In other words, the property stays on the market until first/last/deposit is paid. If the tenant changes their mind after they have paid, but before they move in, we will put the home back on the market but the tenant is responsible until the home is re-rented. Then, when it is re-rented, whatever remains is returned back to the original tenant. If it gets re-rented for the same period (or before) of what the original tenant signed, they would get everything back. If it takes half a month, they'd get half a month and the deposit. ETC. 

    Once the lease is signed and the funds paid & cleared, the marketing is shut down. Until then, we proceed as if the house is still available. Keep in mind we allow 48 hours from the time they receive the lease to sign it and submit payment; once that window closes, they can still sign the lease but we will resume taking applications from other interested parties. 

    Holding fee(not deposit).  One months rent, which rolls over into security deposit at lease signing. Non-refundable.  The reason is, at that point I've approved the tenant and taken the rental off the market.  If the tenant changes their mind, I'm potentially out a month's rent possibly several as other potential tenants see it removed and move on to other rentals.