What is a holding deposit or 'reservation deposit'?

A holding deposit, also known as a 'reservation deposit', is an amount paid by a prospective tenant to reserve a property. As a landlord or agency, you receive this payment prior to the signing of the tenancy agreement, and it will be applied towards

How much can a holding deposit/reservation deposit be?

The holding deposit must not exceed the equivalent of 1 week’s rent for the property being reserved.


How does the holding deposit/reservation deposit process work?

After a potential tenant makes an offer, you, as the property owner, have 24 hours to accept, reject, or counter the offer. While card details are required from the tenant at the point of making an offer, no funds are taken as a holding deposit until you accept the offer. The property remains available on the market until acceptance. Once the offer is accepted, the process of preparing the tenancy agreement and conducting referencing checks begins.


Can the holding deposit/reservation deposit be retained?

PropertyLoop may, at our discretion, retain the holding deposit which will be used to cover our administration expenses for handling the offer and any referencing costs in specific situations, as outlined by the Tenant Fees Act 2019. These situations are primarily designed to cover instances where the tenant either decides not to proceed with the tenancy or does not fulfil their obligations to enter into the tenancy agreement. According to the legislation, a holding deposit can be retained under the following circumstances:

  • The tenant withdraws: If a tenant opts not to proceed with renting the property for any reason, you can keep the holding deposit to compensate for the time and effort invested in the prospective tenancy.
  • The tenant fails to take reasonable steps to enter into the tenancy agreement: Should the tenant not provide the necessary information or documentation within the agreed timeframe, the holding deposit may be retained.
  • The tenant fails a Right to Rent check: In the UK, you are required to verify that tenants can legally rent residential property. If a tenant fails this check, you can retain the holding deposit.
  • The tenant provides false or misleading information: If a tenant provides information that significantly misrepresents their suitability as a tenant, the holding deposit may legally be kept.


What happens to the holding deposit/reservation deposit if the landlord decides not to proceed?

In the unlikely event that you, the landlord, decide to withdraw after both parties have accepted the offer, the holding deposit must be promptly refunded to the tenant. This ensures a level of trust and fairness in the rental process.