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Holding Deposits: A Landlord’s Guide to the Tenant Fees Act 2019
How much can you take, how long can you hold it, and when must you return it? A practical guide for landlords and letting agents in England.
The short answer
A landlord or letting agent may take a refundable holding deposit of no more than one week’s rent to reserve a property while an application is processed. The usual deadline for agreement is 15 calendar days, although a different deadline can be agreed in writing. A holding deposit must normally be refunded within seven days of the relevant event, unless a specific statutory reason permits it to be retained.
What is a holding deposit?
A holding deposit is a payment made by a prospective tenant before the tenancy is granted. It reserves the property while the landlord or agent considers the application, carries out referencing and prepares the tenancy paperwork.
It is not the same as a tenancy deposit (sometimes called a security deposit), which is paid in connection with the tenancy and is generally subject to tenancy deposit protection requirements.
How much holding deposit can a landlord charge?
The maximum is one week’s rent for the whole tenancy, not one week’s rent per applicant. Calculate it using the annual rent divided by 52.
Where several tenants apply together for one joint tenancy, the cap applies to their combined holding deposit. Generally, you must not take another holding deposit for the same property while an earlier one remains outstanding, unless the law permits retention of the earlier deposit.
What is the 15-day deadline for agreement?
Under Schedule 2 of the Tenant Fees Act 2019, the default deadline for agreement is the 15th day of the period beginning on the day the holding deposit is received. This is a period of calendar days, not working days.
It is the deadline for entering into the tenancy agreement, not necessarily the date the tenant moves in.
Can the deadline be extended?
Yes. The landlord or letting agent and prospective tenant can agree a different deadline in writing. It can be longer or shorter than 15 days. For clarity and to reduce disputes, it is recommended to agree a specific calendar date, rather than an open-ended expression such as “until the tenancy is signed”. Keep the tenant’s written agreement on file.
Allow sufficient time for referencing, right-to-rent checks and preparation of the agreement. If more time is needed, obtain written agreement to a revised deadline before relying on it.
When must the holding deposit be refunded?
In most circumstances, the holding deposit must be returned if the tenancy agreement is signed, the landlord decides not to proceed, or the deadline for agreement passes without a tenancy being entered into and no lawful retention exception applies.
- Tenancy agreed: refund within seven days beginning with the date the agreement is entered into.
- Landlord decides not to proceed: refund within seven days beginning with that decision.
- Deadline passes without agreement: refund within seven days beginning with the deadline for agreement, unless a statutory retention ground applies.
With the tenant’s consent, a holding deposit can instead be credited towards the first rent payment or the tenancy deposit once the tenancy agreement has been entered into.
When can a landlord keep a holding deposit?
The Act permits retention only in specified circumstances, subject to the relevant legal conditions:
1. The tenant withdraws
The prospective tenant decides not to proceed with the tenancy.
2. Right to Rent failure
The prospective tenant fails a right-to-rent check, provided the landlord or agent did not know, and could not reasonably have been expected to know, that the tenant would fail before taking the deposit.
3. Materially misleading information
The tenant provides false or misleading information relevant to their suitability, and the statutory reasonableness test is met.
4. Failure to take reasonable steps
The tenant fails to take all reasonable steps to enter into the tenancy agreement while the landlord or agent has taken all reasonable steps to do so.
These exceptions do not give landlords a general right to keep the money whenever an application is unsuccessful. For example, a minor error that does not affect suitability will not ordinarily justify retention.
What if referencing fails or the tenant changes their mind?
If referencing is unsuccessful
A failed reference is not automatically a lawful reason to keep a holding deposit. Consider why the applicant failed. If the tenant accurately disclosed their circumstances and the landlord simply decides not to proceed, the holding deposit will normally need to be returned. Material false or misleading information may justify retention where the statutory test is satisfied.
If the tenant withdraws
If the applicant decides they no longer want the property, retention may be permitted. However, the surrounding circumstances matter. For example, if the landlord materially changes the proposed terms or cannot proceed as represented, it would be unsafe to assume that any withdrawal automatically entitles the landlord to keep the money.
If the tenant does not respond
Keep records of reasonable requests, reminders and opportunities to sign. Non-response may support retention where it amounts to failure to take all reasonable steps and the landlord or agent has taken all reasonable steps, but a missed message alone is not necessarily enough.
A sensible holding deposit process for landlords
1. Explain the terms upfront
Provide the rent, proposed start date, key tenancy terms, expected referencing timescales and the holding deposit conditions.
2. Confirm receipt and deadline
Record the payment date, exact amount and deadline for agreement in writing.
3. Progress the application promptly
Request documents, complete checks, communicate delays and keep dated correspondence.
4. Resolve the deposit correctly
Refund or credit it on time, or send a compliant written retention explanation where legally justified.
Unlawfully charging or retaining a holding deposit can lead to enforcement action and a financial penalty. Applicants can also challenge an unlawful retention through the appropriate enforcement or tribunal route.
Frequently asked questions
Is a holding deposit compulsory?
No. A landlord or letting agent may choose whether to request one.
Can I take a holding deposit from every applicant?
Not simultaneously for the same property where an earlier holding deposit remains outstanding, unless the statutory exception applies. The one-week cap is per tenancy, not per person.
Does the 15-day period include weekends?
Yes. It is calculated in calendar days, beginning with the date the holding deposit is received.
Can we extend the deadline while referencing continues?
Yes, provided a different deadline is agreed in writing with the prospective tenant. A definite date is the clearest approach.
Can I keep the deposit if the applicant fails affordability checks?
Not simply because affordability checks are unsuccessful. Consider whether there was relevant false or misleading information and whether the statutory retention requirements are met.
Can the holding deposit pay towards the first month’s rent?
Yes, after the tenancy agreement is entered into, if the tenant agrees to that use of the money.
Do I have to explain why the holding deposit is being kept?
Yes. A written explanation must be provided within the relevant seven-day statutory period; otherwise the deposit must be repaid.
Is the holding deposit protected in a tenancy deposit scheme?
A holding deposit is distinct from a tenancy deposit. If it is later applied towards a tenancy deposit, the tenancy deposit protection rules must then be followed.
Official sources and further reading
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