a month ago - 6 minute read
Renting can feel like one payment after another. If a property needs a holding deposit, you may wonder what this is and how it differs from a rent deposit. You may also be wondering if you have to pay it!
The Tenant Fee Ban of 2019 introduced a ton of changes to the fees tenants pay to rent. Holding deposits are legal, but there are rules landlords and letting agents have to follow.
Keep reading to learn everything there is to know about holding deposits in 2022, including the holding deposit meaning, how much you can be charged, and how to spot a holding deposit scam.
A holding deposit is a payment you make to a letting agent or landlord to reserve a property you intend to rent.
Once paid, your letting agent should take the property off the market, or list it as “reserved”, and cancel all viewings. They should also start tenant referencing to ensure you can rent the property.
These deposits are refundable, but only if you end up renting the property. They are non-refundable if you change your mind. You can sometimes get a refund when you don’t end up renting it, which we’ll explain later.
Before you start renting, here’s your ultimate guide to holding deposits in 2022 with the 5 most important things you need to know.
In certain circumstances, you can get a refund on your holding deposit when you don’t proceed with renting it.
You can get a refund on your holding deposit if:
Any other reason is at the discretion of the landlord/letting agent.
You cannot get a refund on your holding deposit if:
Related article: Your ULTIMATE guide to tenant referencing
After the Tenant Fee Ban in 2019 (which banned several unfair tenant fees), letting agents can only charge up to 1 week’s rent for a holding deposit.
If you’re asked to pay more than this, it could be a scam. Don’t rent the property or carry out further checks on the landlord to protect yourself.
Related article: Can a deposit be more than rent?
You should only pay a holding deposit after you apply for a property. This is because your letting agent/landlord should process your application before asking you for money.
Otherwise, if something is missing/incorrect, your letting agent should not accept your application.
For example, if you earn below the stated threshold, the letting agent should reject your application instantly or ask for a guarantor before proceeding.
Processing your application is not the same as tenant referencing. Tenant referencing comes after you’ve applied and paid your holding deposit.
Tenant referencing takes time, so the holding deposit is designed to prevent landlords/letting agents wasting time on this process if you’re not suitable.
You should not be asked to pay a holding deposit to:
These properties are likely a scam.
Related article: How to write a WINNING rental application
Assuming everything goes smoothly and you pass tenant referencing, you don’t get your holding deposit returned to you.
It also doesn’t come off your rent deposit, so unless you use a Lifetime Deposit (which moves home with you), you’ll have to pay this in full after paying your holding deposit.
Instead, it comes off your first month’s rent.
Related article: Should you rent a house without viewing it?
Holding deposits are legal in England and Wales, but not in Scotland. If you’re renting a Scottish property, you can only be charged a rent deposit.
If you’re asked to pay a holding deposit on a Scottish property, even from a private landlord, this is illegal and could be a scam.
Related article: Can you rent without a deposit?
Keep reading for all your questions answered about holding deposits!
If you proceed to rent the property, you’ll get a refund, or the money will be deducted from your first month’s rent.
Generally, holding deposits are non-refundable if you pull out of the property.
However, you are entitled to a refund in certain circumstances, including:
Any other reasons are at the discretion of your landlord/letting agent.
Related article: How Lifetime Deposits can help with rent deposit
Yes, you can change your mind about the property after you’ve paid the holding deposit. However, you won’t be able to get your money back.
Holding deposits are required for some properties to prevent tenants dropping out and compensate landlords for wasted time if they do.
Generally, a landlord or letting agent won’t be happy that you’ve changed your mind. They may try to convince you to proceed even if you don’t want to.
However, you are allowed to pull out of the process, and you shouldn’t feel coerced into renting a property you don’t want to live in.
Related article: Top 10 questions to ask when viewing a rental
Yes, you can get your holding deposit back if you fail tenant referencing, but only in certain circumstances.
Tenant referencing is comprised of two main checks: a right to rent check and a financial check.
If you fail the right-to-rent check, you can get your holding deposit back if your letting agent does not give a good reason for keeping the deposit within 7 days of failing.
If you fail the financial check, you can only get your holding deposit back if you told the truth about your finances. This is because failing the financial check shouldn’t happen if you told the truth. The landlord/letting agent should’ve checked your application beforehand to ensure you were suitable.
If you fail the financial check because you lied about your finances, you won’t get your deposit back. For example, if you fabricated a better credit score, lied about previous County Court Judgements, or misrepresented your salary.
Related article: How to decide if a Lifetime Deposit is right for you
Once you’ve paid your holding deposit, the letting agent should take the property off the market and suspend all viewings.
During this time, they’ll complete tenant referencing to ensure you can afford the rent and you have the right to rent in the UK.
Once you’ve passed the checks, they’ll ask you to sign the tenancy agreement and agree a move-in date.
Your holding deposit won’t usually be refunded to you, but you’ll get the amount you paid taken off your first month’s rent.
Related article: How to find a remote-work-friendly rental
If the property you want to rent requires a holding deposit, you have to pay it if you want to rent the property. There’s no getting around it, unfortunately!
Not all properties require a holding deposit. If you don’t want to pay one, you’ll need to find a property that doesn’t ask for it.
If you’re about to move rental, we have good news! You no longer need to save up for a deposit every time you move.
For the first time ever, if you already have a deposit protected in a deposit scheme, you can transfer it to your next property.
A Lifetime Deposit will help you keep hold of £1,200 on average, which we think is pretty neat.
We are on a mission to help more people move, so if you are moving soon, don’t forget your Lifetime Deposit!
If you're a renter, we've got your back. This corner of the Fronted site is loaded with everything from moving tips, Lifetime Deposits, and anything you need to make renting, or moving, a breeze.
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