What is a holding deposit and how does it work?

A holding deposit is an upfront payment you make to reserve the property before signing a tenancy agreement. This deposit is meant to demonstrate the tenant’s commitment to rent the property. In return, the landlord agrees not to rent the property to anyone else. Here are some key points to know about holding deposits in the UK:

Amount: The holding deposit is capped at no more than one week’s rent, and it’s illegal to charge more. This limit is set by the Tenant Fees Act 2019, which applies in England. Similar regulations may apply in other parts of the UK.

Purpose: The purpose of the holding deposit is to ensure that the tenant is serious about renting the property and to ensure the landlord doesn’t miss out by taking the property off the market. If the tenancy goes ahead, the holding deposit is usually put towards the first month’s rent or the tenancy deposit.

Refund policy: You will receive your holding deposit back in full if the landlord changes their mind about letting the property. 

You may lose your holding deposit if you:

• Decide not to proceed with the tenancy
• Don’t pass the right to rent check
• Provide misleading information regarding your suitability to rent the property

You should still get your holding deposit refunded if you fail a credit or reference check, as long as you give honest and factual information.

A refund should be processed within 7 days.

Legal requirements: Landlords and agents are required to provide tenants with specific information before taking a holding deposit, including details about the property, the rent, the deposit, and the tenancy terms. This is to ensure transparency and fairness in the process.

If the landlord doesn’t refund your holding deposit within 7 days, request it in writing. If even then you don’t get it, follow Shelter guidelines on what to do next.