Holding Deposit
A holding deposit is a limited upfront payment a prospective tenant pays to reserve a property while referencing and final terms are agreed. In England, it is capped by law at no more than one week’s rent and counts as a “permitted payment” under the tenant fee rules, as updated and reinforced alongside the Renters’ Rights Act 2025.
A holding deposit should:
Take the property “off the market” for an agreed period.
Compensate you if the applicant withdraws or has misled you in their application, for example about income, immigration status or adverse credit.
However, there are strict limits on when you can keep it. In broad terms you must refund the holding deposit if:
You decide not to proceed.
You do not enter into a tenancy agreement by the deadline for reasons within your control.
If a tenancy goes ahead, the holding deposit should normally be put towards the first rent payment or tenancy deposit, with the tenant given written confirmation.
Unfair terms, excessive sums, or using multiple overlapping holding deposits risk breaching consumer law and the permitted payment caps, which are a key enforcement focus under the Renters’ Rights Act.
