Holding deposit law in the UK: the cap, the 15-day deadline and when a landlord can keep it

A holding deposit is the money a prospective tenant pays to take a property off the market while you do your checks. It is small, but it is one of the most tightly regulated payments in letting. Holding deposit law in the UK, for properties in England, sits in Schedule 2 to the Tenant Fees Act 2019, and it sets a cap, a deadline, a refund timetable and a short list of reasons you can keep the money. Outside those reasons, it goes back.

This post explains each rule, how a holding deposit differs from a security deposit, and how the Renters' Rights Act changes the picture around it. It applies to England only; Wales has its own rules.

The cap: one week's rent

A holding deposit is a permitted payment, but anything above one week's rent is a prohibited payment (Tenant Fees Act 2019, Sch 1 para 3(3)). One week's rent means the annual rent divided by 52 (Sch 1 para 3(4)).

For a monthly rent, multiply by 12 and divide by 52. At £1,100 a month, that is £13,200 a year, so the maximum holding deposit is £253.84 (round down, not up).

You also cannot take a second holding deposit for the same property while an earlier one is still held and none of the retention grounds applies to it (Sch 1 para 3(5)). In other words, no taking holding deposits from two applicants at once.

The deadline for agreement

The "deadline for agreement" is the 15th day of the period beginning with the day you receive the holding deposit (Sch 2 para 2(1)). Count the day of receipt as day 1: received on 1 March, the deadline is 15 March.

You and the applicant can agree a different deadline, but only in writing (Sch 2 para 2(2)). If references are slow, agree the extension by email before the original deadline passes, and keep the email.

When you must refund, and how fast

You must repay the holding deposit if (Sch 2 para 3):

• you and the tenant enter into the tenancy agreement;
• you decide, before the deadline, not to go ahead; or
• the deadline passes without a tenancy agreement.

The refund is due within 7 days, beginning with the date of the tenancy agreement, the date you decided not to proceed, or the deadline, as the case may be (Sch 2 para 4). Again, the first date counts as day 1.

Refunds go to the person who paid the deposit, which may be a parent rather than the applicant. If the tenancy goes ahead, you do not have to refund it if the person who paid it consents to it being put towards the first payment of rent or towards the tenancy deposit (Sch 2 para 6). Get that consent in writing. If it goes towards the tenancy deposit, that amount is treated as received on the date of the tenancy agreement for deposit protection purposes (Sch 2 para 7), so the 30-day protection clock starts then.

When you can keep it

You can keep the holding deposit only in these situations:

• Right to rent. You are prohibited from letting to the applicant because of their immigration status under section 22 of the Immigration Act 2014, and neither you nor your agent knew, or could reasonably have been expected to know, before you accepted the deposit (Sch 2 para 8).
• False or misleading information. The applicant gave false or misleading information and you are reasonably entitled to take it into account in deciding whether to grant the tenancy (Sch 2 para 9).
• The applicant pulls out. They tell you or your agent, before the deadline, that they have decided not to go ahead (Sch 2 para 10).
• The applicant drags their feet. You (and any agent) took all reasonable steps to enter into the tenancy before the deadline, but the applicant did not (Sch 2 paras 11 and 12).

The last two are switched off if, before the deadline, you or your agent asked for a payment the Act prohibits, or behaved in a way that made it unreasonable to expect the applicant to go ahead (Sch 2 para 13).

Match the timing to the reason. You can rely on these last two grounds only once the deadline has passed without a tenancy, so do not tell the applicant before then that you have decided not to go ahead. If you decide before the deadline not to proceed, you can keep the deposit only for false information or right to rent (Sch 2 paras 3 and 8 to 12).

Even when a ground applies, you must give written notice explaining why you are keeping it to the person who paid the deposit. It goes within 7 days beginning with the date you decided not to proceed (false information or right to rent) or with the deadline (every case where the deadline passes without a tenancy). If you do not, you must repay it (Sch 2 para 5). "Non-refundable" in your advert does not change any of this, a point our post on deposits and non-refundable deposits makes for consumer contracts more generally.

Breaching Schedule 2 can lead to a financial penalty of up to £5,000 from trading standards or the council (Tenant Fees Act 2019, s 8).

Holding deposit vs security deposit

They are different payments with different rules:

	Holding deposit	Tenancy (security) deposit
When	Before the tenancy is agreed	At or after the tenancy is agreed
Cap	One week's rent	Five weeks' rent (six if annual rent is £50,000 or more)
Rules	Tenant Fees Act 2019, Sch 2	Housing Act 2004, ss 213 to 215
Protection	Not protected in a scheme	Must be protected and prescribed information given within 30 days

The deposit cap is in Sch 1 para 2. The 30-day protection and prescribed information rules are in Housing Act 2004, s 213(3) and (6). Since 1 May 2026, if a tenancy deposit is not properly protected, the court can make a possession order only in limited circumstances (Housing Act 2004, s 215).

What changed with the Renters' Rights Act

The holding deposit rules themselves are unchanged, but the payments around them are tighter. For an assured tenancy, any rent payable before the tenancy is entered into is now a prohibited payment (Tenant Fees Act 2019, Sch 1 para 1(1A)). After signing and before the start date, you can take only the "initial rent" the law allows (Housing Act 1988, s 4B). So the old habit of "holding deposit, then six months' rent up front" is gone.

The tenancy must also be preceded by the written statement of terms. Our guide to the written statement of terms under the Renters' Rights Act explains what goes in it.

How the Landlord Pack helps

The Applicant Criteria and Holding Deposit Letters in The Landlord Pack (England) include:

• a holding deposit record: amount, who paid it, date received, the deadline for agreement, any written extension, the reason relied on (and whether it is a deadline-only reason), the event that starts the 7-day clock and the last date to act;
• a holding deposit terms letter setting out the deadline, the refund timetable and the retention grounds before the applicant pays;
• a refund letter for each refund situation; and
• a retention letter addressed to the person who paid, with a checklist to run before sending it (including matching the timing to the reason), and prompts to state the facts behind the ground relied on.

The same document has a letting criteria sheet and a referencing record, including a right to rent table for every adult occupier, so you can show why you kept a deposit if challenged.

The letters do not decide whether a ground applies. If you are unsure, the pack's own advice is to refund. Take advice if an applicant disputes a retention or a right to rent check is unresolved.

For quick answers on guarantors, possession and the new database, see the Landlord Pack FAQ. And keep the deposit records with the rest of your property file; our legal housekeeping checklist is a useful prompt.

This is general information, not legal advice on your situation.

See what's in The Landlord Pack (England).

Sources

• Tenant Fees Act 2019, Sch 1 (permitted payments: rent, tenancy deposit, holding deposit)
• Tenant Fees Act 2019, Sch 2 (treatment of holding deposit)
• Tenant Fees Act 2019, s 8 (financial penalties)
• Housing Act 2004, s 213 (deposit protection)
• Housing Act 2004, s 215 (sanctions)
• Housing Act 1988, s 4B (rent in advance)