A parent enrolled two children into a Minnesota family child care provider's program and paid a two-week deposit for each child.
A week before the children were to start care, the parent called and said she was staying at her current daycare and wanted her deposit back.
The provider said that her deposit was to be used towards the children’s last two weeks in care and her contract required the parent to give her a two-week notice when the last two weeks would start. The parent is being persistent about wanting her money back.
Should the provider give the deposit back to the parent?
Unfortunately, the provider’s contract did not address what would happen in this situation when the parent never brought the child to care. This makes it difficult to determine whether the provider is entitled to keep the money.
Clearly the provider intended to keep this money if the parent never showed up, but this may not have been communicated to the parent. My advice to the provider was to keep the money since the provider can argue that this payment was to hold the spot open for the parent and that the parent didn’t give her a two-week notice.
How can this problem be avoided?
The use of the word “deposit” to describe this payment is a mistake because parents will think that they can get a deposit back. Call it a “nonrefundable holding fee.”
If you are going to apply the holding fee to the last two weeks of care, make it clear in your contract that this fee will only be applied to the last two weeks of care if the child is enrolled.
In my opinion, any payment made by a parent before enrolling the child that requires the provider to hold the spot for the parent should be treated as a holding fee and should not be applied to care after care begins.
This fee can be a flat rate ($100) or a percentage of your normal rate (25%, 50%, 100%). If the parent doesn’t want to pay a holding fee, you should not promise to hold open a spot.
If the parent wants to enroll her child on February 1st but says she can't afford to pay the holding fee, here's a suggestion:
Tell the parent you will continue to advertise to fill the space in your program.If you find another parent who wants to enroll their child before February 1st, you will call the first parent and tell her you will hold the spot, but only if you are paid something to do so. If you don't find another parent before February 1st, you haven't lost any money and the parent won't have to pay.
How would you handle this same situation?
Tom Copeland - www.tomcopelandblog.com
Image credit: www.zillow.com
For more information see my book Family Child Care Contracts & Policies.