Can a Landlord Take a Holding Deposit?

What is a holding deposit?

A holding deposit is a payment to a landlord to reserve a property.

In most cases, the tenant should get the money back if the landlord decides not to rent to them.

Most other charges such as reference fees are banned from 1 June 2019.

How much can you charge

From 1 June 2019, a holding deposit can’t be more than 1 week’s rent.

How to calculate:

Monthly rent x 12 ÷ 52 = maximum holding deposit

The landlord should refund any money the tenant has paid above this limit. 

What should happen when the holding deposit is paid

The landlord should stop advertising the property.

They are not allowed to take a holding deposit from more than one person for the same property at the same time.

Entering into a tenancy agreement

You have 15 days from when you pay a holding deposit to enter into a tenancy agreement. This is called the deadline for agreement.

You can agree a different deadline with the tenant in writing.

If they enter into a tenancy agreement, the landlord can either:

  • return your holding deposit within 7 days of agreeing the contract
  • put it towards a tenancy deposit or the first rent payment with your permission

The tenant could lose their holding deposit if they decide not to go ahead, or don't take reasonable steps to agree a tenancy by the deadline.

Once you've signed a tenancy agreement, this will usually be legally binding unless the tenant can end the tenancy early The landlord might be able to keep the holding deposit as part of any agreement to release the tenant from the contract. 

If the landlord decides not to rent to the tenant

The landlord should return the holding deposit to the tenant within 7 days if either the:

  • landlord decides not to offer the tenant a tenancy
  • deadline has passed but the tenant took all reasonable steps to agree a tenancy by then

When the landlord can keep a holding deposit

The landlord can only keep the holding deposit if the tenant:

The landlord can’t keep the money for any other reason.

For example, the tenant should still get the holding deposit back if they fail a credit check, provided they told the truth about their situation.

The landlord must write to the tenant within 7 days to explain why they are keeping the holding deposit. If they don't, they must return the holding deposit in full.

If the tenant decides not to rent the property

The landlord can normally keep the holding deposit if the tenant either:

  • decide not to go ahead with the tenancy
  • don't take the necessary steps to agree a tenancy by the deadline

The tenant should still get their money back if they decide not to rent the property because the landlord has acted unreasonably. This could include if you significantly change the terms of the tenancy or ask them to pay a banned fee.

Misleading statements

The landlord can keep the money if the tenant has misled you about something that affects whether you offer them a tenancy.

For example, if the tenant said their income was a lot higher than it is.

More help: Letting Your Property