Holding deposit retained after withdrawal

The rules on holding deposits for assured shorthold tenancies in England are set out in the Tenant Fees Act 2019, particularly Schedule 2. A holding deposit is a payment (capped at one week’s rent) that you make to reserve a property while the landlord or agent carries out checks and prepares the tenancy. It is not the same as your tenancy deposit or first month’s rent.

The starting point is that the holding deposit must normally be repaid. However, the Act sets out specific circumstances in which the landlord or agent is entitled to keep some or all of it. Whether they can keep it if you pull out depends on why you pulled out and whether they complied with the rules.

When the landlord can keep the holding deposit:

The landlord or agent may retain the holding deposit in the following main situations:

1. You decide not to proceed and withdraw. If you simply change your mind and pull out of the proposed tenancy, the landlord can usually keep the deposit, provided they have complied with their own obligations (see below).

2. You fail a Right to Rent check. If you do not have the right to rent in the UK, the deposit can be retained (subject to some exceptions where the landlord knew or ought to have known you did not have that right).

3. You provide false or misleading information. If you give information that the landlord is reasonably entitled to rely on in deciding whether to let to you, and this materially affects their decision (for example, misrepresenting your income, references or rental history), they can keep the deposit.

4. You fail to take all reasonable steps to enter into the tenancy. If the landlord takes all reasonable steps to progress the tenancy but you do not, for example by failing to respond, sign or engage before the deadline, they may retain the deposit. The landlord cannot keep it on this basis if their own conduct made it unreasonable for you to proceed.

When the landlord must repay it:

The holding deposit must be repaid in these circumstances:

1. You enter into the tenancy. It should then be put towards your rent or tenancy deposit, or repaid.

2. The landlord decides not to let the property to you, for a reason other than one of the retention grounds above.

3. The landlord fails to enter into the tenancy before the deadline for agreement. The default deadline is 15 days after the deposit was paid, unless you both agree in writing to a different date. If the landlord lets that deadline pass without a tenancy being agreed and it is not your fault, the deposit must be repaid.

4. The landlord imposes a term you are not prepared to accept, and this is the reason the tenancy does not go ahead.

Important condition on retention:

Even where a landlord relies on one of the retention grounds, they cannot keep the deposit if they themselves acted in a way that made it unreasonable for you to proceed, or if they behaved in a manner to which you could reasonably object. There are also notice and timing requirements: if a landlord intends to keep the deposit, they generally must notify you in writing of the reason within a set period (seven days of deciding not to proceed, or of the deadline for agreement). Failure to give proper written reasons can mean they must repay it.

Repayment deadlines:

Where repayment is due, it must generally be made within 7 days of the relevant event (for example, the tenancy being entered into, the landlord deciding not to proceed, or the deadline for agreement passing).

Does this apply to your situation:

The Tenant Fees Act applies to assured shorthold tenancies, student accommodation lets by private providers, and licences to occupy housing in England. It does not apply in the same way to some other arrangements. If your accommodation is university-owned halls, purpose-built student accommodation, a lodger arrangement, a holiday let, or a commercial let, the position may differ and the terms of the contract you signed would govern instead. It is worth checking exactly what type of agreement you paid the deposit under.

Practical next steps:

1. Gather your evidence. Collect the advertisement, any written terms, the receipt or proof of payment, the amount paid, the date paid, and all messages between you and the landlord or agent. Note any agreed deadline for agreement.

2. Identify why the tenancy did not proceed. This is the key question. If you simply changed your mind, the landlord is likely entitled to keep it. If the landlord delayed, changed the terms, behaved unreasonably, or failed to progress matters before the deadline, you may be entitled to repayment.

3. Check for written reasons. If the landlord is retaining the deposit, ask them to confirm in writing the specific statutory ground they are relying on. If they have not given written reasons within the required period, point this out.

4. Make a clear written request. If you believe repayment is due, write to the landlord or agent setting out the facts, the relevant provisions of the Tenant Fees Act, and a deadline for repayment (for example, 7 days). Keep it factual and polite.

5. Escalate if refused. If the agent belongs to a redress scheme (letting agents in England must be members of an approved redress scheme, such as The Property Ombudsman or the Property Redress Scheme), you can complain to that scheme once you have exhausted the agent’s internal complaints process. You can also report a prohibited payment or unlawful retention to your local trading standards authority, which enforces the Act and can impose financial penalties.

6. Consider the First-tier Tribunal or small claims. You can apply to the First-tier Tribunal (Property Chamber) to recover a wrongly retained holding deposit or an unlawful payment, or bring a claim in the County Court small claims track. Given the modest sums involved (capped at one week’s rent), weigh the time and effort against the amount at stake, and try the free routes first.

Key factors that change the answer:

The outcome turns heavily on the reason the tenancy fell through, whether the landlord complied with the written reasons and deadline requirements, and whether the arrangement is actually covered by the Tenant Fees Act. If you can tell me why you pulled out, what type of accommodation it is, how much you paid, and whether the landlord gave you any written explanation, I can give you a more precise view on whether they are entitled to keep it.