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

Question

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.

Randy E. · Answer

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.

Mindy Jensen · Answer

Be careful how you word it. Fees can be kept, deposits are subject to return.

Chris G. · Answer

I got the form of the Holding deposit fee from Nolo's Landlord's right and responsibilities.  Excellent resource for California landlords.

Steve Babiak · Answer

@Chris Martin has supplied some good input on this topic in another thread:

http://www.biggerpockets.com/forums/52/topics/8048...

Mark B. · Answer

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.

Chris G. · Answer

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.

Latesha Moore · Answer

Deposit

Mike S. · Answer

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.

JD Martin · Answer

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.

Brett Hearn · Answer

@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.

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

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