Can a Landlord Keep a Holding Deposit? The Rules in England Explained

A landlord in England can keep a holding deposit only if the tenant fails a Right to Rent check, gives false or misleading information, pulls out, or fails to take all reasonable steps to sign by the deadline when the landlord has done so, under Schedule 2 to the Tenant Fees Act 2019. Written reasons must reach the tenant within 7 days, or the deposit must be refunded.

This article is for general information purposes only and does not constitute legal advice. Landlords should seek independent legal advice for their specific circumstances. It describes the position in England.

What is a holding deposit, and how much can a landlord take?

A holding deposit, meaning money paid by or on behalf of a tenant to a landlord or letting agent before a tenancy is granted, to be dealt with under Schedule 2, is defined in paragraph 3(2) of Schedule 1 to the Tenant Fees Act 2019. It is one of the few payments the Act permits. Anything above one week's rent is a prohibited payment under paragraph 3(3).

One week's rent is the annual rent divided by 52, under paragraph 3(4). The cap applies to the property, not to each tenant. GOV.UK statutory guidance for enforcement authorities gives the example of three joint tenants paying £240 a week in total: the maximum holding deposit for the whole property is £240, not £240 each.

The figures are rounded down to the penny so they do not exceed the cap. Our holding deposit calculator works out the cap for any rent.

Only one holding deposit can be held for the same property at a time. Paragraph 3(5) of Schedule 1 makes a second holding deposit a prohibited payment where an earlier one for the same housing has not been repaid and was not lawfully kept. The statutory guidance advises that this stops a landlord taking deposits from several applicants at once.

How long does a holding deposit last?

The default deadline for agreement is the 15th day starting with the day the landlord or agent receives the deposit, under paragraph 2 of Schedule 2. Landlord and tenant can agree a different deadline in writing. A deposit received on 3 November would have a default deadline of 17 November.

By that deadline, one of three things normally happens: the tenancy is entered into, the landlord decides not to go ahead, or the deadline passes with no tenancy. Each one starts a 7 day clock.

When must a holding deposit be refunded?

Paragraph 3 of Schedule 2 requires the deposit to be repaid in three situations, and paragraph 4 sets the time limit at 7 days.

When the tenancy goes ahead, paragraph 6 allows the deposit to be put towards the first payment of rent or the tenancy deposit, but only with the tenant's consent. Two consequences follow:

• Since 1 May 2026, paragraph 1(1A) of Schedule 1 makes rent paid before an assured tenancy is entered into a prohibited payment. The holding deposit can be converted to rent once the tenancy is entered into, not before. Our rent in advance guide covers the wider rules.
• Under paragraph 7, any amount applied to the tenancy deposit is treated, for section 213 of the Housing Act 2004, as received on the date the tenancy agreement is entered into. That date starts the 30 day clock for protecting it and serving the prescribed information, explained in our tenancy deposit protection guide.

When can a landlord keep a holding deposit?

A landlord or agent can keep the deposit only where one of four exceptions in paragraphs 8 to 12 of Schedule 2 applies. Outside these, it must be refunded.

The two tenant-led exceptions, withdrawal and failing to take reasonable steps, are subject to paragraph 13. They do not apply if, before the deadline, the landlord or agent breached section 1 or 2 of the Act by requiring a banned payment, or treated the tenant in a way that made it unreasonable to expect them to go ahead.

Right to Rent. The paragraph 8 exception only works where the landlord could not reasonably have known about the problem before taking the deposit. Landlords are advised to carry out the check early in the process. Our Right to Rent guide for self-managing landlords explains the check itself.

Can a landlord keep a holding deposit if the tenant fails referencing?

Only where the failure comes from false or misleading information. The government's statutory guidance gives examples of relevant false information, such as a tenant who has lied about income or employment, or who has not disclosed a County Court Judgment. It also says that information which does not affect suitability, such as a misspelled name, cannot justify keeping the deposit.

A tenant who told the truth but does not meet the landlord's affordability or credit criteria is a different case. If the landlord decides not to proceed, that is a decision under paragraph 3(b), and the deposit must be refunded within 7 days unless another exception applies, such as a failed Right to Rent check under paragraph 8. Landlords are advised to do their basic affordability checks before taking a holding deposit, not after. Our guide to tenant referencing and what is unlawful to ask sets out the checks.

Since 1 May 2026, the Renters' Rights Act 2025 has also made it unlawful, subject to limited exceptions, to refuse a tenant because they have children or receive benefits, as government guidance on rental discrimination explains. A landlord who withdraws for a reason like that must still refund the holding deposit, and may face separate enforcement under those rules.

What must a landlord do to keep a holding deposit lawfully?

The landlord must give the tenant written reasons for keeping the deposit within the same 7 day period. Paragraph 5 of Schedule 2 provides that a landlord who believes one of the exceptions applies, but does not give written reasons within that period, must repay the deposit. The statutory guidance says the same: where a landlord or agent keeps the deposit, the reasons must be given in writing.

A missed 7 day window cannot be repaired later, so the reasons letter is the document that matters. It is sensible for it to name the exception relied on, the facts behind it, and the dates, and for the landlord to keep proof that it was sent and received. Our article on proving a tenant received a document covers how to evidence service.

What happens if a landlord keeps a holding deposit unlawfully?

There are two enforcement routes: the local authority can impose a civil penalty, and the tenant can apply to the First-tier Tribunal. A tenant can report a suspected breach to the local authority.

The offence in section 12, for which section 8(3) allows a civil penalty of up to £30,000 instead of prosecution, applies to repeat breaches of sections 1 and 2. On the statutory wording it does not cover Schedule 2. The statutory guidance states that a further unlawful retention within five years can lead to another penalty of up to £5,000 and that it is not a banning order offence.

A tenant cannot use section 15 to recover an amount that was applied, with their consent, to rent or the tenancy deposit, under section 15(6). The amount of any penalty is for the enforcement authority to decide, and a landlord can appeal a final notice to the First-tier Tribunal.

Holding deposit checklist for landlords

1. Work out the cap as annual rent divided by 52, for the property as a whole.
2. Complete affordability checks and the Right to Rent check before taking the deposit where you can.
3. Take only one holding deposit for the property, and stop accepting others once it is paid.
4. Agree the deadline for agreement in writing if it will be later than day 15.
5. Get the tenant's written consent before applying the deposit to rent or the tenancy deposit, and only once the tenancy is entered into.
6. If you rely on an exception, send written reasons within 7 days and keep proof of service.
7. Protect any part applied to the tenancy deposit within 30 days of the tenancy date, and serve the prescribed information.

Where this fits in LLCR

The holding deposit is the first payment in a tenancy, and the Tenant Fees Act 2019 guide sets out every other payment the Act allows. Once part of it becomes the tenancy deposit, the protection rules take over; the LLCR Academy course Tenancy Deposit Compliance for Landlords (England) covers the 30 day rule, prescribed information and proof of service lesson by lesson.

On the LLCR platform, each property's record can hold the holding deposit receipt, the tenant's consent to apply it, any written reasons, and a dated proof of service entry showing what was sent, to whom and when. LLCR is free for one property.

Taking a holding deposit on a new let? The free LLCR compliance checker shows what else needs to be in place before the tenancy starts, and the holding deposit calculator confirms the cap in seconds.