Deal with a deposit dispute
You can get affordable advice from Which? Legal if you're having trouble getting your deposit back. You'll get personal advice from an expert who'll give you guidance on what you can do.
What is a holding deposit?
Typically, there are two types of deposit you’ll come across when you want to rent a property: a holding deposit and a security deposit.
A holding deposit is paid when you intend to rent a property and want the letting agent to place a hold on the property being shown to other prospective tenants, while you go through the referencing process before you sign a tenancy agreement.
If you pay a holding deposit to the letting agent, it means that you’re committed to renting the property and that the landlord is committed to renting the property to you, providing checks are successful.
Once you’ve paid a holding deposit, the letting agent or landlord should hold the property off the market for you until your checks are returned and you have signed the contract.
It’s important to check whether the property is being advertised by any other letting agent in order to ensure that it’s ‘off the market’.
A holding deposit is different from a security deposit (sometimes referred to as a tenancy deposit), which is paid to the landlord as a security measure in the event you should damage the property or fail to pay your rent. The holding deposit will usually be deducted off any security deposit, should you proceed with the tenancy.
What if I want to pull out of renting the property?
At the moment, holding deposits don’t have to be protected in a deposit protection scheme, so you may have difficulty getting all of your holding deposit back if you decide you no longer want to rent the property.
Holding deposits are normally non-refundable. In the event of a deal falling through, the landlord or letting agent will most likely decide to keep the holding deposit to compensate for any inconvenience caused and the property will go back on the market. It’s therefore important to establish what terms and conditions apply should you withdraw your application for the tenancy.
What if the holding deposit doesn’t hold the property?
Paying a holding deposit means the property should be held off the market for you until referencing checks have been carried out. If you have handed over a holding deposit and checks were not carried out, the letting agent should return your holding deposit to you in full.
If the property is only being advertised by one agent and is still being marketed after you have paid the holding deposit, you should raise this matter directly with the letting agent. You may have grounds for a complaint. However, it is important to check if the property is being held with any other letting agents, as they may not be bound by this agreement.
Feeling pressurised into making a quick decision?
We understand that finding a property to rent can be a pressured situation and that you’ll need to move fast sometimes - especially if you know others are also interested.
So, at the very least try to get verbal confirmation that your holding deposit will take the property off the market, and that no one else will also be paying the deposit at the same time.
If you feel uncomfortable with handing over a holding deposit on the spot, then take a step back and assess whether the property is really want you want.
If you do decide you want to proceed, then these are the important questions to ask the letting agent about the holding deposit there and then.
- Are you the sole agent for marketing this property or not?
- On receipt of this payment will you place a hold on this property by taking it off the market, while we undergo the referencing process?
- Is the holding deposit refundable or not?
- In what circumstances would you be entitled to keep the holding deposit?
- Are there any other terms and conditions that apply?
If you feel you have more time to hand over a holding deposit, it's a good idea to get confirmation in writing that the letting agent will safeguard your deposit, as this makes it easier to complain if the letting agent breaks your agreement. If you made a verbal agreement, it's also a good idea to follow up on what was said via email or in writing.
So, to be on the safe side, you should always ask your letting agent to confirm to you in writing how your holding deposit will be used. Or write an email to your letting agent asking them to confirm in writing:
- the amount of the holding deposit
- how it is going to be used
- if it will be used towards your security deposit or rent
- if any amount goes towards any fees
- if it will be returned to you in the event the landlord changes their mind
- in what circumstances it will not be refunded
This will help you confirm the terms and conditions of your holding deposit with your letting agent.
What if the letting agent breaks our agreement?
If the letting agent breaks any agreement that has been made with you, you may have a claim either against them or directly against the landlord for breach of contract.
One option for dealing with them refusing to refund the holding deposit would be to first complain directly to the letting agent. If they don’t have a complaints procedure you can write directly to the agent that you’ve been dealing with.
Should this not resolve the matter your complaint can be referred to a trade body or professional association, if your agent is a member of one.
The main trade bodies are:
- ARLA (the Association of Renting and Letting Agents)
- NAEA (the National Association of Estate Agents)
- NALS (the National Approved Letting Scheme)
- UKALA (the UK Association of Letting Agents).
You may also be able to pursue a court claim against either the letting agent, landlord or both.
What happens to my holding deposit when I start renting?
Once you have signed the contract, your holding deposit would usually go towards your security deposit or be refunded to you when you move in. This should be explained to you before you pay the holding deposit.
If your holding deposit is used as all or part of the security deposit, there will then be an obligation placed on the landlord to place the security deposit in a deposit protection scheme.
Since 6 April 2007, all security deposits are required to be protected in a security deposit or insurance scheme.
Find out more about security deposits and how to get them back at the end of your tenancy if you’re facing difficulties.
You can also read our tips on what you should know before renting.