Rent and Credit > What is a holding deposit?

What is a holding deposit?

Wollit Team2 minute read · Updated 8th August 2024

A holding deposit, sometimes referred to as a holding fee, is a sum of money paid by a potential tenant to a landlord or letting agent to reserve a property before signing a tenancy agreement.

This deposit shows that the tenant is serious about renting the property and presumably is not “shopping around” by making multiple offers at the same time.

Once the holding deposit is secured, the landlord can also feel more confident about running checks on things like references, credit history, and the tenant's ability to pay rent.

Is a holding deposit the same as a tenancy deposit?

No, in fact a holding deposit is quite different from a tenancy deposit:

A holding deposit is paid before signing a tenancy agreement to reserve a property, while a tenancy deposit is paid once you move in, and serves as a guarantee against damages or unpaid rent.
A tenancy is usually capped at five weeks' rent for properties with an annual rent under £50,000, and six weeks' rent for properties above this threshold.
Unlike holding deposits, tenancy deposits must be protected in a government-approved tenancy deposit protection scheme (“DPS”).
Finally, holding deposits are not permitted in Scotland. Scottish landlords can only ask for a tenancy deposit.

How much is a holding deposit?

In England and Wales, the amount of a holding deposit is capped at the equivalent of one week's rent for the property.

Here’s an example:

Monthly rent is £1,200;
Per year this adds up to £14,400;
This means that the weekly rent is about £277 = £14,400 divided by 52 weeks.
Which means that the maximum holding deposit would also be £277.

This is a legal limit, so if you’re asked for more you’re probably not dealing with a very legit landlord or agency.

What happens after I pay a holding deposit?

Once you’ve paid a holding deposit, the landlord or letting agent must take the property off the market. This means that other potential tenants won’t be able to make competing offers.

Then you’ll have about 15 days to agree on the tenancy terms. If you decide that you want to withdraw your application or if the landlord finds out that you’ve provided false information, then you might lose the deposit.

If you pass the checks and continue with the application, the landlord will either refund your holding deposit or subtract the amount from the first month’s rent.

Can a landlord keep my holding deposit?

A landlord can retain your holding deposit if you withdraw from the rental application, provide false information, or fail a right to rent check. That’s it.

However, if the landlord decides not to proceed with your application for any other reason, they must refund your deposit in full within seven days.

What if my credit check fails?

If you fail a credit check due to providing accurate information, you should also receive your holding deposit back. The landlord, as we’ve said already, can only keep it if you changed your mind, gave false information, or failed the “right to rent” check.

This is why it’s so important to improve your credit file. It can be frustrating to pass every other rental check but get rejected because of your thin or bad credit history.

Luckily, now there are many apps that can help you build and improve credit.

One such app is Wollit. Wollit is an app available both on Android and iOS, and it works by reporting a fixed-fee monthly subscription as a loan repayment to all three credit reference agencies. This helps you build your credit history and directly influences your credit score.

On top of this, Wollit can also report your monthly rent payment to Experian. This can add another line in your credit report that shows lenders that you’re reliable and pay your bills on time. Eventually, this will help you improve your credit score so you won’t need to be worried about any credit check ever again.