Holding Deposit Rules for Landlords: What Changes in 2026

The holding deposit rules many landlords learned in 2019 under the Tenant Fees Act remain largely intact under the Renters' Rights Act 2025 — but the surrounding tenancy framework has changed enough that it is worth revisiting the basics. From 1 May 2026, with all tenancies becoming periodic and a new written statement regime, getting the holding deposit right is more important than ever.

What is a holding deposit?

A holding deposit is a sum the prospective tenant pays to take a property off the market while you carry out reference checks and prepare the tenancy paperwork. It is not the same as the security deposit, which is paid at the start of the tenancy and protected in a deposit scheme.

The holding deposit is a commitment to proceed in good faith — from both sides.

How much can I take?

The cap remains one week's rent. To calculate one week's rent, divide the annual rent by 52 (or take the monthly rent and multiply by 12, then divide by 52). Round in the tenant's favour.

You cannot take more, and you cannot take a holding deposit from more than one prospective tenant for the same property at the same time. Doing so is a banned fee under the Tenant Fees Act 2019 and exposes you to fines of up to £5,000 for a first offence and up to £30,000 for repeat breaches.

How long can I hold it for?

You have 15 days from the day the holding deposit is paid to either:

• Enter into a tenancy agreement, or
• Refund the holding deposit, or
• Apply the holding deposit toward the first rent or security deposit (with the tenant's written consent)

This is known as the "deadline for agreement". You can extend it by written agreement with the tenant, but if you simply let the 15 days slide without an extension or a tenancy starting, you must return the deposit in full.

When can I keep the holding deposit?

You can keep some or all of the holding deposit only in narrow circumstances:

• The tenant fails a Right to Rent check that they could not have known they would fail
• The tenant provides false or misleading information that materially affects your decision
• The tenant withdraws from the tenancy after paying the holding deposit
• The tenant fails to take all reasonable steps to enter into the tenancy (for example, refuses to provide standard references or sign the agreement on reasonable terms)

In each case, you must give the tenant a written statement within 7 days explaining why you are retaining the deposit and the specific reason. No written reason within 7 days, and you must refund in full — even if you had a good case.

When must I refund?

You must refund the holding deposit in full if:

• You decide not to proceed for any reason that is not the tenant's fault
• The 15-day deadline passes without a tenancy starting (and without a written extension)
• The tenant pulls out before you have completed your checks and you have not yet incurred costs you can lawfully recover
• You took a holding deposit from another prospective tenant for the same property

Refunds must be paid within 7 days of the tenancy not going ahead.

Practical record-keeping

The most common mistake landlords make with holding deposits is failing to document the reason for keeping the money. The default position is "you must refund" — keeping the deposit is the exception, and the burden is on you to justify it in writing within the 7-day window.

A simple checklist for every holding deposit:

1. 1Issue a receipt the day it is paid, stating the amount, the property, the deadline for agreement, and the circumstances in which you may retain it
2. 2Diarise the 15-day deadline
3. 3If you progress to a tenancy, get the tenant's written consent to apply the holding deposit to the first month's rent or the security deposit
4. 4If anything goes wrong, decide within 7 days whether you are refunding or retaining and put your reason in writing
5. 5Keep all of this with the tenancy file

Holding deposits and the new written statement

From 1 May 2026, you must give every new tenant a Written Statement of Terms before the tenancy is signed. The holding deposit sequence usually runs: viewing → holding deposit → references → written statement → signed agreement → first rent and security deposit. Make sure your process leaves time for the written statement to be served and read before the tenant commits — failure to provide it carries a fine of up to £7,000.

For help generating the right paperwork at each stage, see LegalDraft Pro.