1. What is a holding deposit?

A holding deposit is a payment made to your landlord or the letting agent before a tenancy is agreed to ‘hold’ the property for you while they check you out and get the paperwork ready.

The fact that you have made this payment is a sign of good faith, justifying the landlord/agent taking the property off the market and reserving it just for you – for a period of time.

Strict rules have now been introduced for holding deposits which were introduced with the tenant fees legislation.  The rules are very similar in England and Wales save for one difference which is set out below.

2. How much should a holding deposit be for?

There are now very strict rules about the amount of money that can be taken for a holding deposit.

The sum allowed is one week’s rent.  This is the annual rent divided by 52 and landlords should round down rather than up.  If more than one week’s rent is charged, then this will be a ‘prohibited payment’.  See below on penalties for non-compliance with the rules.

Note by the way that if you are sharing a property with several tenants on a ‘joint and several’ basis (ie if you all sign the same tenancy agreement) you cannot each be charged a separate holding deposit of one week’s rent.  

The landlord/agent is only entitled to charge one holding deposit per tenancy.

However, they WILL be entitled to charge each of you a separate holding deposit if you all have your own separate tenancy agreements for your room and the right to use the shared parts of the property.

Use our special online calculator below to check the holding deposit allowable in  your case:

3. How long can the holding deposit be held for?

By default, the holding deposit can only be held by the landlord or agent for up to 15 days. 

However, if both parties agree, the period can be extended – for example if the landlord has asked you to provide information that is going to take you a while to obtain.  Make sure you have a written agreement to the extension of time before you hand over the deposit money – an exchange of emails is fine.

At the end of the 15 days (or whatever other period of time is agreed):

  • The tenancy must be signed, or
  • The money must either be returned to you or can be retained by the landlord/agent – depending on the circumstances.

Let’s now look at what these circumstances are.

4. When must the deposit be paid back to you?

The deposit money must be paid back to you in the following circumstances:

  • If you sign up as a tenant.  Although if you agree, the holding deposit can be put towards the tenancy deposit or the first month’s rent.
  • If the landlord or agent decide not to proceed to let the property to the you (unless this is your fault, as set out in section 5. below)
  • If the tenancy is not signed before the deadline and no extension to the 15 days is agreed

5. When can the landlord or agent withhold your deposit?

The deposit money can be withheld in the following circumstances:

  • If you fail a Right to Rent check
  • If you provide false or misleading information which materially affects your suitability to be a tenant – for example, if you say you have a higher salary than is, in fact, the case, or if you say you have no County Court Judgements registered against your name when in fact you do (do not lie about this as most landlords and agents will carry out a credit check which will show these up).
  • If you decide not to go ahead with the tenancy
  • If you ‘fail to take all reasonable steps’ to enter into the tenancy agreement – for example, if you don’t respond to reasonable requests (eg to provide information) or don’t turn up to sign the tenancy agreement, or if your referees fail to respond to the landlords request for a reference.

6. When must the money be returned, if appropriate

If under the rules you are entitled to the return of the holding deposit, this must be refunded to you within seven days of either

  • the date of the decision not to proceed with the tenancy, or
  • From the 15 day deadline or whatever other period is agreed.

If your landlord or the agent are going to keep the deposit money, they must write to you within the seven day period notifying you of this and giving their reason.

7. Holding deposits in Wales

The rules for holding deposits in Wales are pretty much the same as in England save that the landlord or agent has to give you ‘specified information’ before the holding deposit is paid to them.  

The information they have to give is set out in The Renting Homes (Fees etc.) (Holding Deposit) (Specified Information) (Wales) Regulations 2019.

The information is as follows:

  • The amount of the holding deposit, 
  • the address of the rented property in respect of which the deposit is paid,
  • where a holding deposit is to be paid to a letting agent, the name and contact details of that letting agent,
  • where a holding deposit is to be paid to a landlord, the name and contact details of that landlord,
  • the duration of the contract,
  • the proposed occupation date,
  • the amount of the rent
  • the rental period,
  • any proposed additional contract terms or proposed modifications to fundamental or supplementary terms or terms proposed to be omitted from the contract,
  • the amount of any security deposit,
  • whether a guarantor is required and, if so, any relevant conditions,
  • the reference checks the landlord (or letting agent) will undertake, and
  • the information the landlord or letting agent requires from you.

The information must be provided to you in writing (ie they cannot just tell you about it in a phone call) but the information can be given ‘electronically’ (eg by email) if you agree to this.

8.Your rights if the rules are breached

If the landlord or agent charges a holding deposit which is too high, or withholds it when they should have paid it back to you – you should first contact them and ask them to pay you.

If

  • they refuse to do this, or
  • if you think their reason for withholding the money is wrong, or
  • if they just refuse to discuss it with you,

you can apply to the First-Tier Tribunal for an order that they pay the money back to you.  IF the order is made and they don’t pay it, the order is enforceable as if it were a County Court Judgement.

The landlord or agent can also be prosecuted or fined by the Local Authority.  So you may want to notify them about it.  Don’t expect them to take action in all cases though as Local Authorities tend to be underfunded and understaffed and are not always in a position to take action.

Further Guidance:

9. And finally, some tips

You will not want to give the landlord or agent any excuse to refuse to accept you as tenant AND keep the deposit so make sure that:

  • You only pay a deposit if you are serious about renting the property, and
  • Believe that you will be able to afford the rent
  • You always tell the truth, particularly about your income and any CCJs that may be registered against you – you will normally be found out if you tell lies, in which case you will lose your deposit

This is the end of this article.

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