Date Published 12 January 2026
What are your obligations regarding holding deposits?
As a Poole landlord accepting a holding deposit is not just about taking the property off the market. From that moment, you're taking on legal responsibilities designed to protect the tenant and ensure fair play.
To stay compliant and avoid disputes, you should clearly spell out, ideally in writing, what the applicant is agreeing to. That includes:
Deposit details - State the exact amount being paid and the basis for its calculation. By law, the holding deposit is capped at one week's rent. Is it a flat fee or a percentage of the rent? Make it easy to understand.
Retention scenarios - Explain the specific situations where you're legally allowed to keep the deposit, such as if the tenant backs out or provides false information.
Refund criteria - Outline the conditions under which the deposit will be returned, and when the refund will be issued.
Tenancy timeline - Include the intended move-in date and the agreed rent amount, so there's no ambiguity.
Pre-tenancy steps - Let the tenant know what's expected before the tenancy begins, whether it's passing a reference check, providing a guarantor, signing paperwork, or anything else.
While a formal holding deposit agreement isn't mandatory, it's strongly recommended. It protects both sides and gives you something to fall back on.
When can you retain an applicant's holding deposit?
Under the Tenant Fees Act, holding deposits must be refunded. But there are four tightly defined exceptions where you're legally allowed to keep the money. Here's what you need to know:
1 - If the tenant withdraws
If the applicant changes their mind and pulls out before signing the tenancy agreement, you're entitled to retain the deposit. If you've lost valuable time, the law recognises and supports that.
2 - If the tenant fails the right to rent check
You're legally required to confirm that the tenant has the right to rent in the UK. If they don't pass this check, you can't proceed with the tenancy, and you're within your rights to keep the deposit. This is because if the tenant doesn't meet immigration requirements, the tenancy can't legally go ahead.
3 - If the tenant provides false or misleading information
If the tenant gives you inaccurate details that affect your decision to let, such as overstating their income or hiding adverse credit, you can retain the deposit.
For instance, if they claim to earn £40,000 but referencing reveals it's closer to £20,000, that's a material misrepresentation.
4 - If the tenant doesn't take reasonable steps to proceed
Tenants are expected to cooperate with the application process. If they drag their feet, ignore emails, fail to provide ID, or don't sign the agreement within the 15-day deadline, you may retain the deposit. The key phrase here is 'reasonable steps.' If you've chased them and they've gone silent, you're not obliged to wait forever.
In every case, you must be able to justify your decision. That means keeping written evidence such as emails, referencing reports, signed forms, and timelines.
When should you refund an applicant's holding deposit?
Not every application ends in a signed tenancy, and when it doesn't, you need to know exactly when the holding deposit must be returned to the tenant. Here are the key scenarios where a refund is required:
1 - You decide not to proceed
If you choose not to move forward with the tenancy, whether it's due to a change of heart or a better-suited applicant, the holding deposit must be returned in full.
It's important to note that even if referencing hasn't started, once the deposit is taken, the commitment begins, and backing out means giving the money back.
2 - The tenancy agreement is signed
Once the tenancy is agreed and signed, the holding deposit no longer serves its original purpose. At this point, it should either be refunded or used towards the first rent payment or security (tenancy) deposit.
3 - The deadline for the tenancy agreement passes
Once you take a holding deposit, you've got 15 calendar days to wrap up the tenancy agreement. Should you need more time, the 15-day limit can be extended in writing.
For instance, if the tenant has done everything they were asked to and are ready to sign, but you delay or don't finalise the agreement in time, you must refund the deposit in full.
4 - No agreement is reached, and it's not the tenant's fault
Sometimes, despite best efforts, the tenancy doesn't go ahead. Maybe the rent amount couldn't be agreed upon, or the move-in date didn't work. If the tenant has acted reasonably and none of the legal grounds for retention apply (e.g. withdrawal or providing false info), the deposit must be returned.
What are the consequences of not refunding the holding deposit?
Once a tenant pays the holding deposit, you're legally bound to either move forward with the tenancy or return the money promptly. You get seven calendar days to refund the deposit after one of these happens:
You decide not to let the property
The tenancy agreement isn't signed by the deadline
The tenant signs the agreement
If you fail to refund the deposit when required, the tenant can escalate the issue to the local authority. That could lead to financial penalties of up to £5,000 for a first offence, and up to £30,000 if it happens again.
Beyond the fines, you may even face civil claims, plus there's reputational damage to consider. The government lists past decisions here. This means that if you lose, potential tenants can easily look it up and become hesitant to rent from you.
In short, to avoid dispute or tenancy issues, you need to be confident that the information your applicants provide during tenant referencing is accurate and verifiable.
How can you ensure your applicants provide accurate information?
It's important to get accurate information when referencing a tenant.
Can financial checks affect a holding deposit?
A landlord should ensure they know the 'suitability requirements before taking a holding deposit'. This includes how much an applicant earns as their basic income.
As part of the referencing process, a prospective tenant will undergo a financial check to determine if they can reliably pay their rent on time. The applicant can decide whether this is done through Open Banking or by sending bank statements.
It is important for all landlords in Poole to ask the appropriate questions during the referencing process. If a landlord does not like the prospective applicant's references and wishes to withdraw from the agreement, they must return the holding deposit.
If the tenant has admitted to a poor credit history, landlords or letting agents should 'consider whether additional financial assurances would be appropriate', but they can't withdraw their application and keep the holding deposit.
How can you check if the information the tenant has provided is misleading?
A consistent referencing application is important proof to check whether the prospective tenant has provided false or misleading information. If a landlord believes that an applicant has lied on their application, they can retain the holding deposit.
An application form that's consistent with the agreed referencing criteria will be important proof if a tenant provides you with false or misleading information, as a landlord you must be able to prove the applicant has actively lied to retain the holding deposit.
A landlord can keep a prospective tenant's holding deposit if they provide misleading or incorrect information 'which reasonably affects [their] decision to let the property', and ultimately questions whether the applicant will be a suitable tenant.
If as a Poole Landlord you are worried about taking / holding / administering deposit then you need a letting agent, we have the systems and processes in place to deal with this for you.
Call on 01202 621900 for a free informal chat
