Student tips: Is it a holding deposit or tenancy deposit?

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House hunting for students is now well under way. If you have spoken to housing advisers, they will have reminded you that your tenancy deposit must be protected within 30 days of you paying it.

However before you pay a tenancy deposit you may have to pay a holding deposit. These are two completely different things and can get confused. What’s the difference and why does it matter?

You may have read our advice on this before but here is a refresher for house hunting season!

What’s a holding deposit?

A holding deposit is likely to be the first payment you make.

By paying a holding deposit you are confirming your intention to rent and your landlord is confirming their intention to let - it 'holds' the property for you until you sign a tenancy agreement. If you pull out you will lose this deposit and if the landlord pulls out you should receive the deposit back.

Holding deposits do not have to be protected in a tenancy deposit protection scheme.

So you must be careful - make sure that the property is for you before paying a holding deposit and find out what credit or referencing checks you need to pass. If the tenancy doesn't go ahead because you fail these checks you will lose the holding deposit. 

Check out your letting agent first before handing over any money to make sure they are reputable, and try to use agents who are professionally accredited through bodies such as ARLA, NAEA or RICS – look for the sticker in the window.

What's a tenancy deposit?

A tenancy deposit is paid to the landlord as a security against you breaking the terms in your tenancy agreement, e.g. by causing damage or not paying your rent.

It is usually the value of 4 to 6 weeks rent. If you meet all the terms in the tenancy agreement your tenancy deposit should be paid back to you in full when you leave. If you don’t, the landlord can keep money from the tenancy deposit to meet the costs of putting things right.

The tenancy deposit must be protected in a government approved scheme within 30 days of the landlord receiving it and you must received prescribed information tell you how your deposit is protected.

When a holding deposit becomes a tenancy deposit

When all of the necessary checks are complete and you are ready to go ahead, rather than returning the holding deposit to you it is common for it to be kept and used to cover other fees, or for it to be ‘converted’ into your tenancy deposit.

If it is going to be used for your tenancy deposit, the moment it 'converts' is when you sign the tenancy agreement.

This is important. Your landlord is considered to have 'received' the tenancy deposit at that point and so that is when the 30 day limit to protect it begins.

But again, you must be clear if this is what's happening to your holding deposit so get written confirmation of how the money is being used if you are not getting it back.

If your holding deposit is kept unfairly

Your holding deposit does not need to be protected. Sadly this means that if you lose your holding deposit unfairly we are unable to help. The first place to go for advice is your university or student union housing advisor.

Otherwise, use one of the following resources to seek help:

In the mean time, take a look at this video with tips for tenants on how not to lose your tenancy deposit.