The Difference Between Holding Deposits and Tenancy Deposits

There’s plenty of admin involved when it comes to moving into a new home; contracts to sign, terms to agree, fees to pay. Things can get confusing, especially regarding the different payments you have to make. To help you out, we’ve written a guide to holding deposits, tenancy deposits and the differences between them.

What is a holding deposit?

A holding deposit is a refundable payment that you, the future tenant, make to a landlord or letting agency to reserve a property. It acts as a mutual agreement; you promise to take up the tenancy, and the landlord agrees to take the property off the market while references are checked and the tenancy agreement is signed.

How much is a holding deposit?

Legally, a holding deposit shouldn’t be any more than one week’s rent for the property. A simple way of working out your weekly rent is to multiply your monthly rent by 12, then divide the result by 52.

Who do I pay my holding deposit to?

You pay your holding deposit to your landlord or letting agency, and they hold it for up to 15 days while checking your references and finalising the contract. You should only send your deposit once you’ve agreed the general terms of the let, including rent, rental period and move-in date.

What happens to my holding deposit? 

If the tenancy goes ahead, you will get your holding deposit back. That said, it’s unlikely that you’ll see the money refunded to your bank account; it’s usually put towards your tenancy deposit or first rental payment.

You will also get a full refund if the landlord pulls out of the agreement, but if you decide not to rent the property once the fee has been paid, the landlord or agency can deduct any costs incurred on your behalf or loss of rent from your refund.

couple signing a contract while smiling

What is a tenancy deposit?

A tenancy deposit (also known as a security deposit) is a sum paid at the start of your tenancy. It can be used to pay for any damages to the property during your tenancy and must be registered with a government-approved deposit protection scheme.

How much is a tenancy deposit?

Tenancy deposit amounts vary in size; the maximum amount a landlord can ask is the equivalent of 5 weeks’ rent. A simple way of calculating this is to multiply your monthly rent by twelve, divide the result by 52 and then multiply by 5.

Who do I pay my tenancy deposit to?

Your tenancy deposit should be paid to your landlord, either directly or via a letting agency.

What happens to my tenancy deposit?

Your deposit should be refunded at the end of your tenancy, but the landlord can make deductions to compensate for any damages, missing items or permitted fees, for example replacing lost keys.

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