What a Compliant Holding Deposit Agreement Must Include (England)

If you are putting together a holding deposit agreement for an England let, the single most important thing is not the layout or the branding, it is whether the document is genuinely compliant with the Tenant Fees Act 2019. A holding deposit is one of the very few payments a landlord or agent can still lawfully take from a prospective tenant, and the rules on how much you take, what you must tell the tenant, when you can keep it and when you have to refund it are strict and enforced. Get the paperwork wrong and you can be ordered to repay the money in full and pay a financial penalty on top.

This guide explains exactly what a lawful holding deposit agreement must contain in 2026, sets out sample wording you can copy and adapt, walks through the clauses landlords most often get wrong, and shows you a complete worked example from first enquiry to refund. None of the Tenant Fees Act rules changed under the Renters’ Rights Act 2025, but the tenancy that follows did, so we cover how the holding deposit now feeds into a periodic assured tenancy.

What a holding deposit agreement actually does

A holding deposit is a sum a prospective tenant pays to reserve a property while you carry out referencing and Right to Rent checks. In return you agree to stop marketing the property and not to enter a tenancy with anyone else for a set period. It is, in effect, a short pre-tenancy contract that buys both sides a window of certainty.

A written holding deposit agreement does four jobs:

• Records the amount taken and confirms it is within the legal cap of one week’s rent.
• Sets the “deadline for agreement”, the date by which both sides aim to enter into the tenancy. The statutory default is 15 days from the day the deposit is received, unless you agree a different date in writing.
• Sets out the refund and retention rules, so there is no argument later about whether the money comes back.
• Creates an evidence trail, a signed, dated record you can rely on if a tenant later disputes what was agreed or complains to trading standards.

The agreement is not the tenancy and gives the tenant no right to occupy. Under the Tenant Fees Act 2019 (see legislation.gov.uk) the holding deposit is the only reservation payment you may take besides the tenancy deposit and rent. You cannot bolt on an “admin fee”, “referencing fee” or “application fee”, those are all prohibited payments.

Holding deposit vs tenancy deposit, don’t confuse them

A common source of error is treating the holding deposit as if it were the security deposit. They are different payments, taken at different times, under different parts of the law:

For the maximum security deposit and how it is calculated, see our guide on how much a landlord can charge as a deposit.

The one-week cap: how much you can legally take

The holding deposit is capped at one week’s rent. The statutory formula is straightforward but easy to get wrong:

Monthly rent × 12 ÷ 52, rounded down to the nearest penny. Never approximate by dividing the monthly rent by four, that always overstates the weekly figure and tips you over the cap.

Taking even a single penny over the cap turns the whole payment into a prohibited payment. The consequences are not trivial: you may have to repay the excess (or the whole sum), you cannot serve a valid notice seeking possession until you have repaid it, and trading standards can impose a financial penalty of up to £5,000 for a first offence, rising to £30,000 (or criminal prosecution) for a repeat breach within five years. For a deeper walkthrough of the maths and the rounding trap, see our guide on the holding deposit one-week cap.

When you must refund, and when you can keep it

This is the part most free templates handle badly. The default position is that the holding deposit must be refunded within 7 days of whichever of these happens first:

• the tenancy is entered into (the money is then usually credited toward the first rent or the tenancy deposit, with the tenant’s agreement);
• the landlord decides not to proceed;
• the deadline for agreement passes without a tenancy being entered into; or
• the landlord withdraws from the proposed tenancy.

You may only retain the holding deposit in a closed list of circumstances set out in Schedule 2 of the Act:

• the tenant provides false or misleading information that the landlord is reasonably entitled to take into account in deciding whether to let (for example, misstating their income, employment or rent history);
• the tenant fails a Right to Rent check and the landlord would be at risk of a penalty by letting to them;
• the tenant notifies the landlord that they have withdrawn from the proposed tenancy; or
• the tenant fails to take all reasonable steps to enter the tenancy by the deadline, where the landlord has taken those steps.

Crucially, if you intend to keep all or part of the deposit you must give the tenant written reasons within 7 days of deciding to retain it (or within 7 days of the deadline for agreement, whichever is earlier). No written reasons means no lawful retention, you must repay in full. The template below builds this requirement in.

Landlords often assume they can keep the deposit the moment a tenant goes quiet. That is risky. You must show that you took all reasonable steps to enter the tenancy and acted in good faith, if your own delay caused the breakdown, a refund may still be due.

Sample holding deposit agreement wording

Copy and adapt the text below. Replace the bracketed fields. This is a starting point, read the clause notes underneath before you issue it, and never delete the refund or written-reasons wording.

HOLDING DEPOSIT AGREEMENT (England)

Property:           [full address]
Landlord/Agent:     [name and contact address]
Prospective tenant: [name(s)]
Date received:      [date]
Holding deposit:    £[amount] (equal to one week's rent based on a
                    proposed rent of £[monthly rent] per calendar month)
Deadline for
agreement:          [date, default 15 days from receipt unless varied
                    in writing]

1. The prospective tenant pays the above holding deposit to reserve the
   property. The landlord/agent will stop marketing the property and will
   not enter a tenancy with another person before the deadline for
   agreement.

2. The holding deposit is taken under the Tenant Fees Act 2019 and does
   not exceed one week's rent. No other payment (admin, referencing or
   application fee) is required.

3. If a tenancy is granted, the holding deposit will, with the tenant's
   written agreement, be credited toward [the first month's rent / the
   tenancy deposit]; otherwise it will be refunded within 7 days.

4. The holding deposit will be refunded in full within 7 days if the
   landlord decides not to proceed, the deadline for agreement passes
   without a tenancy, or the landlord withdraws.

5. The landlord may retain the holding deposit only where permitted by
   Schedule 2 of the Tenant Fees Act 2019 (false or misleading
   information; failure of a Right to Rent check; the tenant withdrawing;
   or the tenant failing to take all reasonable steps to enter the
   tenancy where the landlord has done so), and only if written reasons
   are given to the tenant within 7 days of that decision.

6. This agreement is not a tenancy agreement and gives no right to occupy
   the property.

Signed (tenant): ______________   Date: ________
Signed (landlord/agent): ______   Date: ________

Clause notes, read before you send

• Deadline for agreement: the statutory default is 15 days from receipt. You can agree a different date in writing, leaving the field blank defaults to 15 days, so fill it in deliberately rather than by accident.
• Clause 2 (no extra fees): spelling out that no admin or referencing fee applies protects you. Some old templates still contain a “non-refundable administration charge” line, delete it; it is unlawful.
• Clause 3 (crediting): you cannot unilaterally roll the holding deposit into the deposit or rent. The tenant has to agree, and you should record that agreement in writing, ideally in the tenancy agreement or a short signed note.
• Clause 5 (retention): “false or misleading information” must be material to your letting decision. A trivial discrepancy, a misspelt former address, say, is not a lawful reason to keep the money.
• Right to Rent: carry out the check before the tenancy starts. A tenant cannot be penalised for a failed check that resulted from your administrative error rather than their own circumstances.

A worked example, start to finish

Priya advertises a one-bed flat at £1,300 per calendar month. On 2 June, applicant Tom offers to rent it and pays a holding deposit. Priya calculates the cap correctly: (£1,300 × 12) ÷ 52 = £300.00, rounded down. She takes exactly £300, issues the agreement above, and stops advertising.

Because they do not agree a different date, the deadline for agreement defaults to 17 June (15 days from 2 June). Priya starts referencing and the Right to Rent check.

• Scenario A, tenancy proceeds. Referencing is clean. They sign a periodic assured tenancy starting 20 June. With Tom’s written agreement, Priya credits the £300 toward the first month’s rent. No refund is needed because the money has been applied with consent.
• Scenario B, Tom withdraws. On 10 June Tom emails to say he has found somewhere else. He has notified the landlord of his withdrawal, so Priya is entitled to retain the £300, but she still emails Tom within 7 days setting out that she is keeping it because he withdrew. That written reason is what makes the retention lawful.
• Scenario C, referencing reveals a lie. Tom claimed a £45,000 salary; the reference shows £24,000 and recent arrears at a previous let. That is material false information, so Priya can retain the deposit, again confirming her reason in writing within 7 days.
• Scenario D, Priya changes her mind. Priya decides to sell the flat instead. The landlord has withdrawn, so the deposit must be refunded in full within 7 days, she cannot keep a penny.

The lesson: the same £300 has four very different fates depending on who caused the deal to fall through and whether the reason was put in writing on time.

Common mistakes that make the agreement unlawful

• Taking more than one week’s rent, the single most frequent breach, usually caused by the divide-by-four shortcut.
• Taking a second holding deposit on the same property from the same tenant after refunding the first within the same period.
• Failing to refund within 7 days, the clock is tight and runs from the triggering event, not from when it is convenient for you.
• Retaining without written reasons, silence is not enough; you must explain, in writing, on time.
• Charging admin, referencing or “application” fees on top, all prohibited payments under the Tenant Fees Act.
• Holding the money in a way you cannot evidence, keep a clear record of the date received and the date and reason for any refund or retention.

For a side-by-side look at what separates a compliant document from a risky one, compare options in our review of the best holding deposit templates for UK landlords, and pair the agreement with a proper holding deposit receipt.

How the holding deposit fits the wider tenancy

The holding deposit is the first of three money milestones. After it comes the tenancy deposit (capped at five weeks’ rent and protected in a government-backed scheme within 30 days), then ongoing rent. The referencing you carry out during the holding-deposit window is what justifies any later decision to keep the money, so get it right. Our guide to tenant referencing in England explains what to check and how, and the holding deposits explained overview joins all the dots.

Note that none of the Tenant Fees Act 2019 holding deposit rules changed under the Renters’ Rights Act 2025, and deposit protection under the Housing Act 2004 (sections 213–215) is also unchanged. What did change is the tenancy structure itself: there are no fixed-term assured shorthold tenancies any more. Every assured tenancy is now periodic, so once the tenancy begins the holding deposit is simply credited and the periodic tenancy runs from day one. When that tenancy eventually ends, you will need a clean record to return the security deposit, our deposit return letter template covers that final step.

Frequently asked questions

Is a holding deposit agreement legally required?

No statute forces you to use a written agreement, but it is strongly advised. The Tenant Fees Act sets out what you must tell the tenant and when you must refund; a written, signed agreement is the simplest way to prove you complied and to head off a dispute or a trading standards complaint.

How much holding deposit can I take?

A maximum of one week’s rent, calculated as monthly rent × 12 ÷ 52, rounded down to the nearest penny. Anything more is a prohibited payment that you may have to repay with a penalty on top.

Can I keep the holding deposit if the tenant changes their mind?

Yes, if the tenant notifies you that they have withdrawn from the proposed tenancy, you may retain it. But you must give the tenant written reasons within 7 days, and you must have taken all reasonable steps yourself. If your own delay caused the breakdown, a refund may still be due.

Do I have to protect a holding deposit in a deposit scheme?

No. Deposit protection schemes apply to the tenancy (security) deposit, not the holding deposit. The holding deposit only needs to be returned or correctly retained within the 7-day window. Once it is credited to the tenancy deposit, however, the protected portion must then be registered with an authorised scheme.

Did the Renters’ Rights Act 2025 change holding deposit rules?

No. The holding deposit cap, the refund window and the retention grounds all sit in the Tenant Fees Act 2019 and are unchanged. The Act changed the tenancy that follows, all assured tenancies are now periodic with no fixed term, but not the reservation payment itself.

Can I take a holding deposit from two applicants at once?

You should not. Once you accept a holding deposit you must stop marketing the property and hold only that one prospective tenancy. Taking deposits from competing applicants for the same property risks multiple breaches and refunds.

Coming soon

A free template is a good start, but it still relies on you calculating the cap correctly, recording the deadline for agreement, and tracking the 7-day refund and written-reasons windows by hand. Tenancy Pilot is launching soon with a fully editable, Tenant Fees Act–compliant holding deposit agreement generator that calculates the one-week cap automatically, sets the deadline for agreement, and prompts you on the refund and written-reasons deadlines so nothing slips. It sits alongside the rest of the document suite, tenancy agreements, deposit return letters, inventories and more, in one compliance command centre with deadline alerts.

Want to be first to use it? Join the waitlist and we will let you know the moment it goes live.

This article is general information for England landlords, not legal advice. Holding deposit rules carry financial penalties, so always check the current guidance on GOV.UK and the Tenant Fees Act 2019 on legislation.gov.uk, and consult a solicitor about your specific situation.