What is a Holding Deposit?

A holding deposit is a sum of money paid by a prospective tenant to a landlord or letting agent to reserve a rental property while referencing checks are carried out, before a tenancy agreement is signed. Think of it as a mutual signal of intent: you’re serious about the property, and the landlord takes it off the market while both sides get their ducks in a row.

At a glance

• A holding deposit is paid to reserve a rental property before signing a tenancy agreement.
• It’s legally capped at one week’s rent under the Tenant Fees Act 2019.
• You’re entitled to a refund unless specific reasons apply, like providing misleading information or pulling out of the tenancy.
• It’s not the same as a security deposit or first month’s rent, these come later.
• It’s different from a tenancy deposit, which is held against damage or unpaid rent at the end of the tenancy.

What is a holding deposit?

A holding deposit is not the rent itself, think of it as a placeholder for the property. Once a potential tenant pays it, the rental property is temporarily taken off the market while everyone works through the essential admin: reference checks, Right to Rent verification, and confirming the rent amount and tenancy terms.

This is standard practice across England and Wales, giving renters breathing room to sort things out before they move in, without the risk of losing the property to another applicant.

Under the Tenant Fees Act 2019, holding deposits are tightly regulated. A landlord or letting agent can only charge up to one week’s rent as a holding fee. To work out the maximum permitted amount:

Annual rent ÷ 52 = maximum holding deposit

So if your monthly rent is £1,200, your annual rent is £14,400, and the maximum holding deposit is £276.92. Anything above that is a prohibited payment under the Act.

When is it refundable, and when is it not?

In most cases, a holding deposit is refundable. But the rules depend on who pulls out and why.

You’re entitled to your holding deposit back if:

• The landlord or letting agent withdraws from the tenancy
• The landlord fails to take reasonable steps to progress the tenancy within 15 days (or an agreed deadline)
• The landlord provides misleading information about the property or the rent payment terms

The landlord can keep the holding deposit if:

• You provide misleading information during reference checks or referencing checks
• You fail the Right to Rent check, a legal requirement in England
• You fail to provide necessary documents within a reasonable timeframe
• You back out after agreeing to proceed with the assured shorthold tenancy (AST)

Always keep written records of what’s been agreed, what was communicated, and when. If a dispute arises over whether a holding deposit should be returned, clear documentation is your best ally.

How does it differ from a tenancy deposit?

This is one of the most common points of confusion for renters. Here’s the key distinction:

Unlike a tenancy deposit, the holding deposit doesn’t need to be placed in a tenancy deposit protection scheme. That said, strict rules about how it’s handled still apply under the Tenant Fees Act 2019.

The security deposit and first month’s rent are separate again – these are typically collected just before or on the day of move in, once the tenancy agreement has been signed. A guarantor may also be required at this stage if the tenant pays a rent amount that exceeds standard affordability thresholds.

What about the assured shorthold tenancy?

Most private rentals in England and Wales are set up as an assured shorthold tenancy (AST). This is the standard legal framework for renting a home, and it’s the context in which holding deposits most commonly apply.

Under an AST, the holding deposit forms part of the early steps toward a formal tenancy. Once reference checks are complete, the tenancy agreement is signed, and the holding deposit is either:

• Credited toward the first month’s rent or security deposit (the most common outcome)
• Returned in full (if the landlord decides not to proceed)
• Retained (if the tenant fails the checks or withdraws without good reason)

What if things go wrong?

If you believe your holding deposit has been unfairly kept, here’s what to do:

1. Request a written explanation from the landlord or letting agent: They’re legally obliged to provide one.
2. Check the Tenant Fees Act 2019: If the retention doesn’t meet one of the permitted reasons, it may constitute a prohibited payment.
3. Contact Shelter or your local council: Both offer free housing advice and can help you understand your options.
4. Consider formal dispute resolution: If the letting agent is a member of a redress scheme, you can raise a formal complaint.

It’s also worth knowing that unlawful retention of a holding deposit can result in penalties for the landlord or agent, so don’t assume there’s nothing you can do.

Note: holding deposits are separate from the tenancy deposit protection scheme (such as mydeposits), which only applies to security deposits held during the tenancy itself. Eviction proceedings and end of tenancy disputes are governed by separate rules entirely.

Once you’re in, protect what’s yours

Once the referencing checks are done, the AST is signed, and you’ve moved in, it’s worth thinking about protecting your belongings. Lemonade’s renters insurance is built for exactly this moment – simple, digital, and designed around what tenants actually need. Get a quote in minutes through the Lemonade app.

Before we go

A holding deposit is an important step in securing a rental property, but it’s not just about handing over cash. Know your rights, keep records, and don’t be afraid to challenge unfair practices. Once you’re settled, consider insurance options like Lemonade Renters Insurance to protect your belongings in your new home. Sorted.

Holding deposit FAQs