A holding deposit describes a payment given to a landlord or agent to make sure a rental property can be reserved for them. It refers to a payment from the person wanting to rent the property, made to either of the above relevant parties. The landlord or agent would then take the property off the rental market. However, any new enquiries received for that property should still be recorded.
If the letting goes ahead, the holding deposit should be used in payment for part of all the main deposit for the property or towards the rent.
What happens if the letting does not go ahead?
It depends on who is at fault for the situation. If the prospective tenant was at fault, the landlord has the right to retain at least part of the deposit paid, if not all of it. This provides a measure of compensation for time wasted.
From the landlord’s point of view, it is important to take no more than around one week’s rent as a holding deposit. This would be a fair amount in compensation if the would-be tenant pulled out.
If the landlord is at fault, or an agent acting on their behalf, the holding deposit paid by the person wishing to rent the property should be returned to them in full.
The importance of a Holding Deposit Agreement or receipt
A document should be drawn up in writing that details the consequences if either party pulls out of the tenancy agreement. The agreement should include information on when the deposit should be returned or retained.
Even when a holding deposit is placed on a property someone wishes to rent, it is not legally binding. The tenant is not required to go ahead if they decide not to, and neither is the landlord or their agent.
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