Questions are being raised over a Halifax leasing company requiring a “holding deposit” for applications, which is being called a “scam” by a prospective tenant and a “predatory practice” by a tenancy lawyer.
Aaron Stevens has been looking for an apartment for two months and found an online ad for a $1,295 single apartment on Barrington Street. As he filled out the application, all seemed normal until he reached the fine print.
Stevens said he needed to send what the company called a “holding deposit cheque” of half a month’s rent — in this case, over $600 — to the company for his application to be viewed.
“I was like, this doesn’t sound right,” Stevens said in an interview with Global News.
Calling the deposit “a scam,” Stevens said it makes him feel helpless.
“You have to give these companies what they want, otherwise they’ll ignore you and go to the 30 other people that responded to the ad,” Stevens said.
Stevens, 27, is five years into his career. Earning twice the minimum wage, he is a 3D modeller who makes virtual reality training simulators for nurses and hospitals.
To save money, he lives in the basement apartment below his parents in his childhood home in Spryfield.
However, health issues are making his parents move and downsize, leaving Stevens to find his own place. He is preparing for the worst.
“I bought all the camping equipment I need in order to become homeless, because that’s a very real possibility right now,” Stevens said.
Deposit for ‘application to be reviewed’
The Barrington Street apartment Stevens was going to apply for is managed by W Suites Apartments, a subsidiary of Paramount Management, which itself is under the Lawen Group.
According to its website, Paramount manages over 2,000 residential units in Halifax.
On its application page, the W Suites Apartments website says: “A holding deposit cheque payable to Paramount Management for half one month’s rent is required to be sent to our office, for the application to be reviewed.”
It said the cheque will be held in a trust and not be deposited until the tenant is approved.
In an emailed statement to Global News, Joanne Lawen Mrakic, a spokesperson for the Lawen Group, said they do require a holding deposit but “Paramount does not charge an application processing fee.”
“Paramount’s policy is to fully refund holding deposits to applicants should they not proceed with a lease signing,” she said.
If the tenant’s application is approved, the holding deposit “is then deposited into a trust account and transfers into a security deposit for the lease.”
However, Stevens’ application said that if he does not sign the lease or accept occupancy after being accepted, his deposit will be “retained by the landlord as liquidated damages, for the landlord’s expense in reserving the suite and checking the applicant.”
When asked for clarification on the discrepancy between her statement and the application terms, Mrakic repeated the same statement: that Paramount’s policy is to refund holding deposits if applicants don’t proceed with the lease.
She did not explain why the policy is different on the application.
Landlords can’t charge application fees
In an email, Blaise Theriault, a spokesperson for the Department of Service Nova Scotia and Internal Services, confirmed that under the Residential Tenancies Act, which oversees renter’s rights in the province, “landlords cannot charge an application fee for a tenant to be considered for a rental unit.”
“Any money taken by a landlord before the lease has been signed or before rent is due is considered a security deposit,” he added.
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Theriault said if a landlord requires a deposit, it can’t be cashed unless the applicant is approved and signs a lease for the unit.
“If a cheque is deposited for an application that is not successful, we would recommend the tenant speak to the landlord to have their money returned, and if they are not successful to file an application with the Residential Tenancies Program,” he said.
When asked directly if Paramount believes their holding deposit violates the Residential Tenancies Act, Mrakic, the Lawen Group spokesperson, did not answer the question but sent another email statement saying that the cheque “is not deposited until the tenant agrees to rent the apartment.”
A ‘predatory practice’
Mitch Broughton is an associate lawyer with CIR Law, a Halifax firm which has a specialty in landlord and tenant law.
Before the Residential Tenancies Board, Broughton recently defended a tenant in a case involving holding deposits. His client had given a holding deposit to a company and then did not go forward with the lease after being approved. The client requested his money to be returned, but was unable to get his deposit back.
In his case, Broughton made the argument that this type of deposit is the same as an application fee.
“I think they’re just trying to get around the act and get around the prohibition on application fees by calling it something else. You can call it a different name, doesn’t mean it’s not what it is,” Broughton said.
Broughton said while the tenant ended up getting his money, he did not have the chance to try to prove it was an illegal application fee because the case was ultimately thrown out on a technicality as the landlord didn’t file proper paperwork.
Broughton says he can’t definitively say if holding deposits are illegal, but he is hopeful tenants will take this matter to the Residential Tenancies Board.
“I think it’s a very predatory practice, and I think tenants should stand up for themselves,” Broughton said.
Under the Residential Tenancies Act, anyone who has paid an application fee to a landlord is entitled to get their money back. If the money is not returned, the person is considered to be a tenant and can bring their case to the Residential Tenancies Board.
‘An impossible situation’
Katie Brousseau, a community legal worker with Dalhousie Legal Aid, could not comment on this particular case with Paramount, but spoke generally about the practice of holding deposits.
“Application fees in Nova Scotia are not legal, so that’s very clear,” Brousseau said in an interview with Global News.
She said she has seen landlords refer to these payments as holding deposits, which can be “equivalent to an application fee.”
Brousseau also said it can be very challenging for prospective tenants to get deposits returned to them if they do not end up renting the unit, adding, “another barrier for people who are accessing housing who might be on more limited incomes.”
Brousseau said landlords might use this practice to pre-screen applicants due to hundreds of applications they receive for each unit, requiring “consent to credit checks and then at times will request illegal deposits or holding fees.”
She has seen an increase in these requests from landlords and said it is reflective of Halifax’s current housing crisis. She advised any future tenants not to put any money forward before being offered a lease, but understands that tenants are in a vulnerable position.
“It’s really difficult to give advice to a tenant in this situation because the alternative is potentially not accessing housing,” Brousseau said.
As landlord companies employ these tactics, it’s people like Aaron Stevens who remain searching for a place to live.
“I’m forced to try and pick myself up and keep going,” he said. “But there’s nothing out there … so, what can you do?”
Has this happened to you anywhere in Canada? Let us know at shareyourstory@globalnews.ca
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