The maximum holding deposit — one week’s rent
- The 1/52 calculation: maximum holding deposit is annual rent ÷ 52 — for £1,000/month rent, maximum is £12,000 ÷ 52 = £230.77
- One holding deposit per property at a time: cannot take a second holding deposit while a first is outstanding for the same property
- Prohibited payment above the cap: exceeding one week’s rent triggers a financial penalty of up to £5,000 for a first offence and potential banning order under the Housing and Planning Act 2016
- Application fee prohibition: referencing fees, administration charges, and credit check fees are all prohibited payments — only the holding deposit (up to 1 week’s rent), tenancy deposit, and first month’s rent are permitted from a prospective tenant
The 15-day reference period
- Default 15-day deadline for agreement: from receipt of holding deposit, landlord must complete referencing and either offer the tenancy, notify non-proceeding, or agree an extension within 15 days
- Extension by prior written agreement: landlord and tenant can agree in writing before the holding deposit is taken to extend beyond 15 days — useful for self-employed applicants requiring extended income evidence
- Repayment within 7 days: where the holding deposit must be repaid, repayment must occur within 7 days of the end of the reference period or of the landlord’s written non-proceeding notification
Written notice required within 7 days of retention decision
Where a landlord retains the holding deposit (wholly or partly), written notice must be given to the tenant within 7 days of the end of the reference period — stating the reason for retention, amount retained, and any amount repaid. Failure to give written notice within 7 days makes the retained amount a prohibited payment.
Permitted retention grounds
- Ground 1 — false or misleading information: tenant provided materially false information that affected the landlord’s decision to let (false employment status, inflated income, undisclosed CCJs, false right-to-rent documents)
- Ground 2 — tenant withdrawal: prospective tenant notifies in writing that they are withdrawing from the proposed tenancy — must be a positive written act, not merely non-response to communications
- Ground 3 — failure to take reasonable steps: tenant fails to respond to referencing requests, provide documents, or be available to sign within the reference period
- Cannot retain where: landlord introduces new terms not previously agreed; landlord withdraws from the tenancy; adverse referencing reveals information the tenant disclosed honestly upfront
Applying the holding deposit when the tenancy proceeds
- Applied against first month’s rent or tenancy deposit — landlord must specify in writing which before the tenancy commences
- Deposit cap interaction: total of holding deposit (if applied to deposit) plus tenancy deposit must not exceed 5 weeks’ rent (below £50,000/year annual rent) or 6 weeks’ rent (£50,000/year and above)
- Cannot be retained as an additional charge once the tenancy proceeds — any excess must be repaid