diff --git a/app/models.py b/app/models.py
index f5bd68eae..b9b460bfd 100644
--- a/app/models.py
+++ b/app/models.py
@@ -888,15 +888,13 @@ class Template(TemplateBase):
     def from_json(cls, data, folder):
         """
         Assumption: data has been validated appropriately.
-
         Returns a Template object based on the provided data.
         """
         fields = data.copy()
 
         fields['created_by_id'] = fields.pop('created_by')
         fields['service_id'] = fields.pop('service')
-        if fields.pop("parent_folder_id"):
-            fields['folder'] = folder
+        fields['folder'] = folder
         return cls(**fields)
 
 
diff --git a/app/template/rest.py b/app/template/rest.py
index 2084bb674..7a8606b45 100644
--- a/app/template/rest.py
+++ b/app/template/rest.py
@@ -48,8 +48,14 @@ def _content_count_greater_than_limit(content, template_type):
     return template.content_count > SMS_CHAR_COUNT_LIMIT
 
 
-def validate_parent_folder(parent_folder_id, service_id):
-    return TemplateFolder.query.filter_by(service_id=service_id, id=parent_folder_id).one()
+def validate_parent_folder(template_json):
+    if template_json.get("parent_folder_id"):
+        return TemplateFolder.query.filter_by(
+            service_id=template_json['service'],
+            id=template_json.pop("parent_folder_id")
+        ).one()
+    else:
+        return None
 
 
 @template_blueprint.route('', methods=['POST'])
@@ -58,8 +64,7 @@ def create_template(service_id):
     # permissions needs to be placed here otherwise marshmallow will interfere with versioning
     permissions = fetched_service.permissions
     template_json = validate(request.get_json(), post_create_template_schema)
-    folder = validate_parent_folder(parent_folder_id=template_json['parent_folder_id'],
-                                    service_id=template_json['service'])
+    folder = validate_parent_folder(template_json=template_json)
     new_template = Template.from_json(template_json, folder)
 
     if not service_has_permission(new_template.template_type, permissions):
diff --git a/tests/app/template/test_rest.py b/tests/app/template/test_rest.py
index c92545af9..6cd9950b0 100644
--- a/tests/app/template/test_rest.py
+++ b/tests/app/template/test_rest.py
@@ -2,6 +2,7 @@ import base64
 import json
 import random
 import string
+import uuid
 from datetime import datetime, timedelta
 
 import botocore
@@ -12,7 +13,13 @@ from freezegun import freeze_time
 from notifications_utils import SMS_CHAR_COUNT_LIMIT
 
 
-from app.models import Template, SMS_TYPE, EMAIL_TYPE, LETTER_TYPE, TemplateHistory, TemplateFolder
+from app.models import (
+    EMAIL_TYPE,
+    LETTER_TYPE,
+    SMS_TYPE,
+    Template,
+    TemplateHistory
+)
 from app.dao.templates_dao import dao_get_template_by_id, dao_redact_template
 
 from tests import create_authorization_header
@@ -125,6 +132,28 @@ def test_create_template_should_return_404_if_folder_is_for_a_different_service(
     assert response.status_code == 404
 
 
+def test_create_template_should_return_404_if_folder_does_not_exist(
+        client, sample_service
+):
+    data = {
+        'name': 'my template',
+        'template_type': 'sms',
+        'content': 'template <b>content</b>',
+        'service': str(sample_service.id),
+        'created_by': str(sample_service.users[0].id),
+        'parent_folder_id': str(uuid.uuid4())
+    }
+    data = json.dumps(data)
+    auth_header = create_authorization_header()
+
+    response = client.post(
+        '/service/{}/template'.format(sample_service.id),
+        headers=[('Content-Type', 'application/json'), auth_header],
+        data=data
+    )
+    assert response.status_code == 404
+
+
 def test_should_raise_error_if_service_does_not_exist_on_create(client, sample_user, fake_uuid):
     data = {
         'name': 'my template',