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What is a holding deposit?

As a prospective tenant you should expect to be asked for a holding deposit from a landlord/letting agent to reserve a rental property.

What is a holding deposit?

A holding deposit is completely separate from a tenancy deposit/security bond. A holding deposit is a sum of money paid to a landlord or letting agent to reserve a rental property before the signing of a tenancy agreement. A holding deposit is normally non-refundable if you were to withdraw your application for tenancy.

Holding deposit do not need to be register under the tenancy deposit rules as it is not held as security in respect of a tenant's liabilities under a tenancy agreement as no tenancy agreement has been signed.

Why do you have to pay a holding deposit?

The holding deposit payment is made with the intention of ‘holding’ a rental property to show that you are genuine with your tenancy application. I this world money talks and some prospective tenant's never follow up their promises of 'coming to finalise the paperwork tomorrow'. You should therefore expect to pay a holding deposit to signify that you are serious with your approach to rent the property.

Once the letting agent/landlord has received a holding deposit together with the application forms, supporting documents, and proof of identity, the property will normally be placed a 'hold' and all future viewings will be cancelled until your references have been completed.

When do you pay a holding deposit?

A holding deposit should only be paid once you have found a property that suits your requirements and you are sure that you want to proceed with a tenancy on that property. You should be asked to pay the holding deposit at the same time as completing your tenancy application forms. If you are required to complete a tenancy application it is recommended that you complete the forms first and ask your letting agent/landlord to check through the forms to make sure that you comply with their basic requirement for income criteria and credit worthiness. Only pay the holding deposit once they have signified that your earning enough to sustain there referencing requirements and they accept your credit profile (although they will still carry out verification checks themselves).

What happens to the holding deposit once the references checks have been completed and your tenancy application has been accepted?

Once the letting agent/landlord has completed their reference checks and accepted your tenancy application, you should expect that any fee's for referencing will be charged from your holding deposit and the remaining balance should go towards your tenancy deposit or first months rent.