A landlord or agent can take a holding deposit from a tenant to reserve a property whilst reference checks and preparation for a tenancy agreement are undertaken.
You cannot ask a tenant for more than one week’s rent as a holding deposit (this cap is based on the total agreed rent for the property). For example, if there are three tenants who are jointly liable for the agreed total weekly rent of £240, you cannot charge each tenant a £240 holding deposit. The maximum this group of tenants could be asked to pay as a holding deposit between them would be £240. They may then choose to split this equally so that each person would pay £80.
You should stop advertising a property once a holding deposit has been paid. Landlords and agents can only accept one holding deposit for one property at any one time. You are not permitted to take multiple holding deposits for the same property.
The cap of one week’s rent on holding deposits is an upper limit and not a recommendation. You are not obliged to take a holding deposit and should consider on a case by case basis whether it is appropriate to take a holding deposit and the appropriate level of deposit to take.
Q. What are my responsibilities?
- You should provide tenants with clear information about why you are requesting a holding deposit, including the sum that is required and the circumstances where they may lose all or part of the deposit (in accordance with the Tenant Fees Act 2019).
- You should not waste a tenant’s time. You should be clear and up-front with tenants about your expectations and check that they meet the basic income and credit worthiness requirements before taking a holding deposit from them. If you consider that they will not be a suitable tenant, you should not take a holding deposit from them. You may do this by having an informal discussion with a tenant about the requirements to let the property (e.g. acceptable level of income).
- You should provide your tenant with a copy of the tenancy agreement before taking the holding deposit.
- You should clearly define what you consider to be credit worthiness – tenants should have a clear understanding of what might count against them so that they have the opportunity to provide any relevant information. If this includes previous missed and late payments, you should make this clear to the tenant.
You must not unlawfully discriminate against a tenant on the basis of their disability, sex, gender reassignment, pregnancy or maternity, race, religion or belief or sexual orientation.
Landlords will usually have two weeks (14 days) to enter into a tenancy agreement with a tenant once a holding deposit has been received by the landlord or agent. This is before the ‘deadline for agreement’, which is the 15th day after the holding deposit has been received. However, you may agree a different ‘deadline for agreement’ with the tenant in writing (which could be more or less than 14 days).
You should provide a tenant with clear information that sets out:
- the amount of deposit they have paid
- the agreed rent for the property
- the specified date for reaching an agreement (‘the deadline for agreement’)
- other material agreed terms you will be letting the property on
You will be able to use this as evidence should a tenant challenge your decision to retain a holding deposit.
You must refund a tenant’s holding deposit in full within 7 days of:
- entering into a tenancy agreement with the tenant
- you choosing to withdraw from the proposed agreement; or
- - he ‘deadline for agreement’ passing without a tenancy having been entered
A holding deposit can only be retained where a tenant:
- provides false or misleading information which you can reasonably consider when deciding to let a property – this can include a tenant’s behaviour in providing false or misleading information
- fails a right to rent check
- withdraws from a property (unless a landlord or agent imposed a requirement that breached the ban or acted in such a way to the tenant or relevant person that it would be unreasonable to expect a tenant to enter into a tenancy agreement with them)
- fails to take all reasonable steps to enter into a tenancy agreement and the landlord or agent takes all reasonable steps to do so (unless a landlord or agent imposes a requirement that breaches the ban or acts in such a way to the tenant or relevant person that it would be unreasonable to expect a tenant to enter into a tenancy agreement with them).
You must return the holding deposit if you impose a requirement that breaches the ban or act in such a way towards a tenant or a relevant person that it would be unreasonable to expect them to enter into a tenancy agreement with you (e.g. a landlord or agent asking a tenant to a pay a fee for referencing, seeking to include an unfair term in the tenancy agreement or acting in an aggressive or harassing way).
ou must set out in writing why you are retaining a tenant’s (or a relevant person’s) holding deposit within 7 days of deciding not to let to them if this is before the ‘deadline for agreement’ or within 7 days of the ‘deadline for agreement’ passing, otherwise you forfeit the right to retain their holding deposit and must return it to them.
Even where you are entitled to retain a tenant’s holding deposit, you should consider whether it is necessary to do so. We encourage landlords and agents to decide on a case-by-case basis whether to retain part of the deposit and understand that they may only need to cover specific costs which have been incurred (for example referencing checks). You should be able to provide evidence of your costs to demonstrate that they are reasonable.