Moving to a new home is always stressful and there’s often fees to pay, alongside deposits if you’re renting. One deposit your letting agent might discuss with you is a holding deposit.
Paying a holding deposit can be handy, especially in a competitive rental market, so it’s a good idea to have the funds ready as soon as you start looking for a new tenancy. It also helps to know what a holding deposit is and how it works.
What is a holding deposit?
Also known as a holding fee, a holding deposit is a refundable payment your potential landlord or letting agent might ask you to pay in order to reserve a property.
Paying a holding deposit takes the property listing off the market, but only once certain terms are met.
The rules covering holding deposits are in the Tenant Fees Act (2019) and they state that a prospective tenant should only pay a holding deposit when they’ve agreed the general terms of the tenancy, such as:
– The moving-in date
– The terms of the tenancy agreement
– The amount on rent
– The length of the tenancy
– The tenant’s (or tenants’) identities
– The rental periods – whether weekly, monthly or quarterly
If the landlord wants to change any of these terms after you’ve paid the deposit and you don’t agree, you can refuse to accept the new terms. If your refusal prevents you taking up the tenancy then your landlord or agency has to refund the entire amount to you.
Once you’ve paid the holding fee, it’s assumed that you’ll be taking up the tenancy, subject to references and any other checks you agree to. It’s also assumed that your landlord won’t be proceeding with any other potential tenants and won’t be taking any other holding deposits from anyone else.
Can the landlord keep my holding deposit?
Your landlord can hold your holding deposit while they run their checks and ask for your references – they shouldn’t charge you for references.
Once you’ve paid your holding deposit, there will be three possible outcomes:
– Your tenancy goes ahead and you move in
– Your landlord decides not to go ahead
– You decide not to go ahead
You should always check the terms of the holding deposit so you know what will happen in each outcome. Your landlord can hold your deposit for a maximum of 15 days to conduct checks (although you can have an extension if you both agree).
If the tenancy goes ahead, you’ll get the holding deposit back, although in most cases the money goes to pay some of the tenancy deposit or rent in advance.
If your landlord decides not to proceed then they have to refund you in full, as stated in the Tenant Fees Act (2019).
If you decide not to go ahead with the tenancy, then the letting agency or landlord can keep some of all of the holding deposit. Depending on the reasons for your decision, however, you may be able to get some or all of the deposit back.
How much should a holding deposit be?
The Tenant Fees Act (TFA) caps holding deposits paid after 2019 at the equivalent of one week’s rent. Your landlord or letting agent can’t ask you to pay any more than this amount.
