How to keep your holding deposit and the law on your side

So, you’ve seen what seems like a million properties and you think you’ve finally found the one, but you worry that someone else will snap it up before you. This is where the holding deposit comes into play. But first things first…


What is a holding deposit and is it the same as a tenancy or security deposit?

A holding deposit is a sum of money that you pay to your prospective landlord or lettings agency to reserve a property and make sure nobody else gets to view it.

A holding deposit is not the same as a tenancy deposit. The latter is more like a prenuptial agreement — a security measure that is designed to protect if things go wrong AFTER signing on the dotted line. On the other hand, a holding deposit is like an engagement ring. It’s a formal show of intent and, in this case, that is your decision to rent a particular property.

Do you need a formal holding deposit agreement?

You are certain you like the property and want to rent it, you hand over your money and happily walk away with the knowledge that the place will definitely be yours in the very near future, right? Wrong!

Sometimes a property is marketed by more than one estate agent and despite you paying for it to be “reserved”, someone else might still beat you to it. So, before you let go of your hard-earned cash, here’s what you need to know.

Payment of any kind of a deposit enters you into what is essentially a contractual agreement. But what are you agreeing to? Be sure to discuss the exact conditions under which the landlord or agent will hold the property for you. For example, what would happen if either party decides to back out?

To go further

>>>The tenant’s guide to deposits
>>> Common ways to lose your deposit
>>> Difference between holding fees, admin fees and deposits
>>> 5 easy steps for a proper check-in when renting

The holding deposit agreement should include details of any administrative fees, whether any part of the deposit will be retained and under what circumstances. Sometimes, the holding deposits will be transferred towards a tenancy deposit upon signing the tenancy agreement. This too should be specified. The signed holding deposit agreement can be used as your payment receipt.


Is my deposit covered by the Tenancy Deposit Protection Scheme?

Unlike the tenancy deposit, a holding deposit is not subject to the government-backed deposit protection scheme. This makes obtaining a signed agreement even more important. However, once you become a tenant, your holding deposit can be transferred into the protected deposit account and then it becomes part of your tenancy deposit.

Find the newest rooms available on Roomgo

What happens if it all turns sour?

You should expect to receive the full holding deposit back if the prospective landlord or letting agent decides not to go ahead with the tenancy. If you weren’t able to move into a property due to exceptional circumstances (e.g. an unexpected and serious health issue, hospitalisation, etc.) or if the property became uninhabitable before you entered into a tenancy agreement, your holding deposit is likely to be returned.

If you can’t come to an amicable agreement with your prospective landlord or the estate agent, a court can help you settle the dispute.

For a court to enforce a contract its terms must be clear and fair. The government has produced Guidance on Unfair Terms in Tenancy Agreements that specifies how a court is likely to act in a handling a deposit dispute.

A blanket “no refunds” clause, for example, is unlikely to be considered fair by the courts. A landlord or his estate agents are also not supposed to impose unfair penalties (those that significantly exceed any actual losses).

But what if it’s you who decides to pull out of the deal? Paragraph 3.42 of the Guidance states the following: ‘where cancellation is the fault of the tenant, the landlord or agent is entitled to hold back from any refund of prepayments a reasonable sum to cover either the net costs or the net loss of profit. Tenants would be at fault if, for instance, they gave false or misleading information, but not merely because the landlord thought their references were not sufficiently good.’

Know your rights, be honest, and your holding deposit will be safe.

Discussion9 Comments

  1. Avatar

    I just searched for the document, and saw it has been withdrawn in June.
    Does it mean that the document is not valid anymore ?
    Thank you

  2. Pingback: What Happens To Your Application Deposit If You Don’t Rent? | Apartment Agents Blog

  3. Avatar

    “However, once you become a tenant, your holding deposit can be transferred into the protected deposit account and then it becomes part of your tenancy deposit.”

    -What makes the tenant a tenant. Is this when we receive the signed contract or when the contract begins?
    A tenant would’nt have tenure over the property unless they move in, am I mistaken?

  4. Avatar
    Christine McCarthy

    Hi l have paid a holding deposit then went back to look at the property and there’s a number of issues security gates handles broken and l am not feeling secure in renting can l get my holding deposit back ?

  5. Avatar

    My daughter rented student accommodation near her University. Her landlord took a holding deposit and inserted a statement in his email correspondence and T&C’s stating that the holding deposit will be used to protect the deposit within 30 days of the commencement of the tenancy. The AST was electronically confirmed in March, the holding deposit (same amount as the security deposit sum) was paid in April and the first quarterly rent paid in July. The AST states that the tenancy period started 3 August but the occupation was from the 1 September.

    My first question is can the landlord enforce this delay in turning the holding deposit into a security deposit as all requirements have been met and therefore a contract has been created. It would definitely appear to be a tactic and a deliberate attempt to hide behind a wording technicality.

    My second question is, as their statement reads “from the commencement of the tenancy”, should I take this as being the start of the tenancy period or the occupation period.

    I am inclined to believe the word commencement of tenancy means start of tenancy or am I incorrect?

    Any advice will be gratefully received.

  6. Avatar

    partner paid holding deposit but left three months later however I’m still in property left with picking up the pieces.its now 6months later she want her holding fee back who pays that or should she get it back

Leave A Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.