Holding deposit vs tenancy deposit — what's the difference?

Tenants regularly conflate two payments at the start of a tenancy: the holding deposit and the tenancy deposit. They're different sums, paid at different times, governed by different rules. Confusing them is one of the easier ways to lose money on the way into a flat.

Two different things

The short version:

• Holding deposit — paid before the tenancy starts, to reserve the property while paperwork is completed. Capped at one week's rent. Refundable in most cases. Has its own rules.
• Tenancy deposit — paid at the start of the tenancy, as security against unpaid rent and damage. Capped at 5 weeks' rent. Must be protected in a government-approved scheme. Returned at the end of the tenancy (subject to legitimate deductions).

What a holding deposit is for

A holding deposit reserves the property while the landlord completes referencing, right-to-rent checks, and the formal tenancy paperwork. During this period the landlord is supposed to stop showing the property to other tenants.

The rules:

• One week's rent maximum (Tenant Fees Act 2019).
• 15-day “deadline for agreement” — by default the parties have 15 days from the day the holding deposit is paid to enter into a tenancy. This can be extended in writing.
• Refundable if the landlord pulls out, fails the right-to-rent check on their side, or the deadline passes without a tenancy.
• Not refundable if you withdraw, give false or misleading information, fail the right-to-rent check, or fail to take reasonable steps to enter the tenancy.

What a tenancy deposit is for

Once the tenancy starts, the tenancy deposit (sometimes still called a “security deposit”) sits as security for the landlord against the things a tenant might owe at the end: unpaid rent, damage, missing items, cleaning needed beyond fair wear and tear.

The rules:

• Capped at 5 weeks' rent (or 6 weeks if annual rent is £50,000+). See our guide to the tenancy deposit cap.
• Must be protected in one of three government-approved schemes (DPS, mydeposits or TDS) within 30 days.
• You must receive “prescribed information” within 30 days.
• Returned within 10 days of you and the landlord agreeing on deductions (if any).

How they connect

If the tenancy proceeds, the holding deposit is usually credited toward the tenancy deposit (or the first month's rent), rather than being refunded and then re-paid.

Whichever way it's applied, the combined effective tenancy deposit can't exceed the 5-week cap. If your holding deposit was one week's rent and is credited toward the deposit, the landlord can ask for at most a further 4 weeks.

When the holding deposit isn't refunded

A landlord or agent can keep the holding deposit if you:

• Withdraw from the tenancy.
• Provide false or misleading information that materially affects the decision to let to you.
• Fail the right-to-rent check (where the issue is on your side).
• Fail to take reasonable steps to enter into the tenancy within the deadline.

They must give you written reasons within 7 days. If the explanation looks thin — for example, the agent claims you “withdrew” when actually the property had already been let to someone else — push back in writing. Trading Standards take complaints about Tenant Fees Act breaches seriously.

FAQ