The law that regulates holding deposits changed recently and, although a letting agent or landlord can still charge you to ‘hold’ a rental property before you move in, they can no longer pocket the cash on a whim. Here we explain how the new system works.
On face value holding deposits sound like a sensible idea. In a competitive market, a tenant pays a deposit to secure a property for a set period (usually two weeks) prior to a tenancy contract being signed, giving them peace of mind that they’ve found somewhere to live.
And the landlord or letting agent is happy that the tenant has committed to the property. Therefore, they can take it off the market and stop fielding calls from other tenants.
But until now this informal and unregulated system has been abused by a small handful of rogue letting agents and landlords.
Deposits disappeared
In the past holding deposits were supposed to be returned when the rental started, or deducted from the tenancy deposit.
But some unscrupulous letting agents and landlords have been pocketing holding deposits, framing them as a ‘fee’ for securing a property, not a deposit.
Because of this, the law has now changed after the Tenant Fees Act became law. Holding deposits must now last for two weeks (unless otherwise agreed between you and the agent or landlord) and returned within seven days of a tenancy beginning.
The only legitimate reasons for NOT having a holding deposit returned are if you decide not to take the property without good reason, fail a Right to Rent check, provide inaccurate or misleading information about yourself (e.g. say you’ve got a job when you haven’t) or you drag your feet and take more than two weeks to sign the tenancy contract.
The new law also means renters can't make offers on several properties and hope for the best; their holding deposits for the ones they eventually reject will not be returned. But if you feel a holding deposit has been taken unfairly, take the case to The Property Ombudsman.
And remember that letting agents cannot ask for a holding deposit as a requirement of renting a property. Also, if a landlord or letting agent in general behaves badly (e.g. makes threats, is rude, etc) during the two weeks then the tenant is entitled to have their holding deposit returned if they then decide not to move in.
Overall, the new system ushered in by the Tenant Fees Act is designed to make both tenants, letting agents and landlords behave more responsibly and fairly when properties are 'reserved' withholding deposits. It's up to all sides to play fair, ultimately.
What do I do if my holding deposit hasn’t been returned?
First of all, landlords and letting agents are not allowed to withhold your holding deposit without explanation. They must give written notice that they are going to keep it, and explain why.
If they fail to do this, then you can report them to local Trading Standards officers who will then investigate. Or contact the national trading standards team enforcing the law. But before you do this it’s a good idea to contact your local Citizen’s Advice group for advice.
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Remember the information provided in this article is for information purposes only and should not be considered as advice.
