Holding Deposit Agreement

This Landlord’s Holding Deposit Agreement is for use by a private sector landlord in England when collecting a holding deposit prior to entering into an assured shorthold tenancy agreement.

This Template Agreement acknowledges receipt of a holding deposit, it confirms that the landlord will not let the property to any other person until this agreement is cancelled, or expires (and the tenancy agreement has not been entered into) and it sets out when the holding deposit is to be repaid and retained.

The Tenant Fees Act 2019 (“the Act”) (which affects England only) introduced new rules regarding holding deposits. Not all landlords collect holding deposits but if one is collected, the Act highlights the importance of having a written agreement.

Landlords must not collect more than one holding deposit per property at any one time otherwise this will amount to a prohibited payment and the landlord will be in breach of the Act.

The Act introduced a cap on the amount of a holding deposit to be collected from prospective tenants to reserve a property. A landlord must not collect more than one week’s rent. If a landlord collects more than one week’s rent, this will be a prohibited payment and a landlord will be in breach of the Act.

Under the Act a holding deposit must be refunded within 7 calendar days of the tenancy being entered into (although there is provision for the holding deposit to be applied to the first instalment of rent or towards any permitted security deposit subject to the consent of the prospective tenant). If the prospective tenant consents to the holding deposit being applied to the security deposit, then this must be protected within a tenancy deposit protection scheme.

If the parties (both acting reasonably) fail to enter into a tenancy agreement within 15 days of receipt of the holding deposit paid by the Tenant (‘the Deadline for Agreement’) (unless an extension is agreed), the Landlord must repay the holding deposit to the tenant within 7 days of the Deadline for Agreement.

The template agreement lists the specific circumstances when the holding deposit can be retained. You must write to the prospective tenants within 7 days if the holding deposit is being retained otherwise you forego the right to retain the deposit.

Landlords can be subject to a fine of up to £5,000 for a first offence. If a further offence is made within five years of the first, this will be a criminal offence and a landlord could be liable for an unlimited fine. Some local authorities may impose a financial penalty of up to £30,000 as an alternative to prosecution.

Landlords will also not be able to evict a tenant using the section 21 eviction procedure to regain possession of their property until they have repaid an unlawfully retained holding deposit.

There is a Letting Agent’s Holding Deposit Agreement (England) which can be used by letting agents collecting holding deposits on behalf of landlords in England and it can be found in the Residential Lettings Terms and Conditions subfolder.

The Renting Homes (Fees etc.) (Wales) Act 2019 which is due to come into force on the 01 September 2019 contains similar provisions regarding holding deposits. A specific holding deposit agreement for use in Wales will be produced prior to this act coming into force.

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