When a tenant has viewed a room and makes an acceptable offer to rent, the landlord or Agent can request a holding deposit. This will hold the room for a set period of time and the room cannot be shown to other prospective tenants while the necessary checks are made.
The holding deposit is different from a security deposit and is paid to show the tenant's commitment to the room or property. The landlord's acceptance of the deposit shows their acceptance of the tenant subject to necessary checks, providing some reassurance to the tenant that, as long as everything is in order, the room or property is theirs in the event of successful checks such as references, financial, or right-to-rent checks.
A Landlord can refuse to accept a holding deposit and keep the room on the market until a contract has been signed and the initial rent and security deposit has been paid.
On Reddit, one user was concerned when their son found somewhere to rent through an agent. The Agent emailed asking for a holding deposit to be transferred immediately to a bank account to remove the property from the market.
User /pdiddydoodar says, "Seems dodgy to me that you would send money to an unknown company before knowing what you are signing up to."
As mentioned above, this is a legitimate request from the Agent, but of course, the prospective tenant should do some due diligence on the Agent to ensure their authenticity.
Unlike security deposits, holding deposits are not protected in a Tenancy Deposit Protection Scheme.
If you are a landlord considering renting a room, please register here and begin posting your room adverts. For Tenants, you can register as a lodger here and post your profile. This will allow RoomsForLet to match your details against available rooms.
How much Holding Deposit can a landlord take?
A holding deposit is limited to the equivalent of one week's rent. If the rent is calculated monthly, this must be multiplied by 12 and then divided by 52 to give a weekly amount. This is the maximum holding deposit that can be requested.
What happens to a Holding Deposit?
Once a tenant moves into the room or property, the holding deposit can be fully refunded or deducted from the first month's rent. A refund must be made within 7 days of the tenancy start date.
There are several options if the tenant does not move in. If the landlord pulls out and decides not to move forward with the tenant for no apparent reason, the holding deposit must be refunded in full. If there is an issue with the tenant checks, such as the inability to pay the rent or the failure of Right to Rent checks, then the landlord is within their rights to retain some or all of the holding deposit.
Likewise, the landlord may retain the holding deposit if the tenant pulls out and decides not to rent the room.
Where the landlord retains all or part of the holding deposit, the landlord must write to the tenant within seven days to explain the reasons behind this decision. If an explanation is not received within the requisite time, the tenant shall be entitled to a full refund of the Holding Deposit.
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