In theory they can't but having sought advice it seems the letting market is quite unregulated. I asked them to either confirm that they were proceeding in line with the terms agreed or to refund the holding deposit immediately if they were withdrawing from the agreed contract. I copied in the Property Ombudsman and the National Apprived Letting Scheme (their advice was hopeless, 'approval' counts for nothing) and this seems to have helped as they have refunded the deposit to my bank this morning.
Avoid One To One Estates in Archway!
So, back to house hunting...
Getting a bit excited making plans for September
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