The Difference Between Holding Deposits, Security Deposits and Agency Fees

Confused about rental fees? There’s holding fees, security deposits, a month’s rent up front, admin fees… and that’s all before you’ve even managed get your hands on the keys!

For tenants, it can feel like all parties are trying their best to extract a share of your hard-earned cash.

To help you understand where your money’s going – and where it shouldn’t be going – we’ve written a short guide for tenants on the big three move-in costs: holding deposits, security deposits and upfront agency fees.

These costs, along with the first month’s rent, are known as they move-in moneys. Read up on your move-in money rights and you’ll never get ripped off again!

What Is a Holding Deposit/Holding Fee?

The holding deposit is also sometimes called a holding fee. It is an amount of money that a tenant puts forward to show the landlord that they are serious about taking the property.

Likewise, the landlord should only accept it if they want to let to you, subject perhaps to completing referencing checks. They hold the money while the checks go on and other admin is completed, such as drawing up the contract and arranging a day to do the signing, etc.

We ran a quick poll of renters and found that 69% of tenants have paid over £500 for a holding deposit, with 46% having paid over £750!

 

Once the holding deposit is placed, three things can happen:

  • the landlord accepts your offer
  • the landlord rejects your offer
  • you change your mind and pull out

1. The Landlord Accepts Your Holding Deposit

If the landlord accepts your application, then you get the holding deposit back.

You won’t see the money returned to your bank account, however. If you are going to be the tenant, then you’ll need to pay the other move-in moneys: the first month’s rent and the security deposit. So in practice, you don’t actually get the holding deposit returned. Rather, the value is simply taken off the amount you need to pay for the other move-in moneys.

2. The Landlord Rejects Your Offer

If the landlord rejects your offer, your holding deposit should be refunded. If the landlord or agent ordered referencing on you, then they may detract any referencing fees from your holding deposit.

3. You Change Your Mind and Pull out

If you pull out, the landlord/agent is entitled to your holding deposit as forfeit. In this scenario, you don’t get your deposit back. It goes to the landlord or agent to cover them against any loss of time and money

It’s important to get the terms of the holding deposit in writing so that everyone knows what will happen in each of the three scenarios.

What is a Security Deposit?

The security deposit is the large sum (usually 4-6 weeks rent) paid at the start of a tenancy. It is returned to you at the end of the tenancy, but the landlord can make deductions from it to pay for the repair of any damage done to the property.

When you pay the security deposit, the landlord must register it with a government-approved deposit protection scheme. They also have to send you information about the scheme they’ve used, how much money makes up the deposit, and how you can contest any deductions they may make.

This information is called the prescribed information. You’ll need to sign a document saying that you’ve received it within a time limit of 30-days from when you pay.

What Can Be Deducted From a Deposit

Your landlord can deduct any rent you owe when you move out. They can also make deductions for missing items that were supplied within a furnished property.

Deductions from the security deposit can be made for damage to the property, but not for normal wear and tear. There’s no precise definition of wear and tear, but if you use the property and its supplied furnishings in a normal, responsible way, then you shouldn’t have to pay any damages. Shelter have a guide on what is included in wear and tear.

 

What Are Rental Admin Fees?

Letting agents will often try to charge you a fee. If your response to this fact is “Wait, what? Why?” then we agree with you.

OpenRent doesn’t charge any admin or agency fees – and we don’t allow our landlords to charge you any fees, either. That makes us pretty special, since nearly all letting agents charge huge fees to tenants.

Search OpenRent properties now and save hundreds by avoiding letting agent fees

While it’s obvious what the security or holding deposits pay for, many agents deliberately make their fees confusing or opaque, meaning they can effectively charge as much as they want. They hide behind terms like “Admin Fee” and “Set Up Fee” which are really code for “Printing a Pre-Written Contract Fee”.

There’s little consensus among agents about how much to charge in fees, or what to claim they pay for. Some agents have a fixed fee, and some charge an amount relative to the rent: e.g. two weeks’ rent.

Government research recently found the average letting agent fee is £300 per tenant. Infuriatingly for the tenants paying this, they don’t seem to receive any service for their money. Things like advertising the property, conducting the viewings and processing referencing checks all benefit the landlord in letting the property, not the tenant. Yet often tenants are told this is what the money is being used to paid for.

Aren’t Tenant Fees Banned Already?

A ban on fees was promised in the November 2016 Autumn Statement, but we’re still a long way away from the ban happening. We don’t think it will happen until summer 2019 at the earliest.

Until then, you can still avoid paying admin fees by using OpenRent. We let more properties than any agent in the country, so there’s a great chance you’ll find a great new home and save £100s!

 

28 Replies to “The Difference Between Holding Deposits, Security Deposits and Agency Fees”

  1. Hi I recently put down a £200 deposit on a property and have now taken the £20 per tenant reference money off this does the rest of the £200 deposit go towards my first month rent and deposit ? For example if the property is £500 pcm and they want a £400 deposit do we pay £660 in total after putting the £200 deposit down ?

    1. Hi Jeff – the remaining holding deposit money goes towards the advertised total. E.g. if the advert said “Holding Deposit: £400” and you had £160 of the holding deposit left after referencing, then you would only need to pay the difference between the two sums.

  2. Are landlords obligated to either accept or reject our offer within a certain amount of time after the holding deposit is paid? We paid the holding deposit on January 6 and completed the referencing checks by January 16 for a February 24 proposed move-in date. The agency have confirmed they’ve passed the references to the landlord, and I keep chasing, but we haven’t received a confirmation yet. I’m getting nervous because our current lease ends at the end of the month.

  3. Hi
    I was asked to pay £250 holding fee which was deducted from the deposit £1500.
    So I paid a further £1250.
    The paperwork says the deposit is £1250.
    So what happened to the £250? Should this not be returned at end of tenancy as it was described as being included as part of the deposit?

    1. Hey Victoria, it’s very likely that holding deposit will go/has gone towards your first month’s rent. That’s the usual practice. It’s important, however, to make sure you have in writing exactly how you’re holding deposit will be treated in every scenario before you pay it. Let me know if that answers your question!

  4. I really like a place a gave 400 to secure the property, the agent was very pushy and made me sign a contract commencing in 2 weeks. After I realised the notice time on the other place was 1 month. I called straight away to ask this to be changed but I was told is not possible and if I decide no to go ahead I will loose my 400 because the landlord cannot wait 2 weeks. Please advise. I don’t want to loose my money.

    1. Hi Gina, Sorry to hear this. It’s hard for anyone to advise you without seeing the agreement you signed. In general though, if you’ve signed a tenancy agreement, then you are liable to pay the rent of the property as described by the tenancy agreement. So there may not be much you can do. But it really does depend on the details so get in touch with professional advisors like Shelter if you need further advice!

  5. Recently arrange a viewing via a letting agency for a property. The landlord conducted the viewing and I went for the place there and then and did all the paper work via her not the agency. I paid a deposit direct to the landlord via a bank account. Now 2 days later the agency have left me a voice mail saying about discussing a holding fee but I paid my deposit. Can the agency actually charge me anything/much when 95% was done direct through the landlord ?

    1. Hi Liam,

      First of all, I should say that making a bank transfer to someone claiming to be the landlord at the end of a viewing leaves you open to being the victim of a very common property scam! I’m glad to hear the landlord was legitimate on this occasion. Now to answer your question.

      You are in a very good position here in that if you’ve signed a tenancy agreement with the landlord and played a deposit, all with no mention of an agent, then the agent will find it very charge you for anything. The landlord may have stitched up their agent here, and could be in a bad position if they broke the terms of their agreement with the agent, but that’s all extraneous to your situation.

      The agent won’t be able to charge you a holding deposit, since there’s nothing to hold as you’ve already signed the tenancy agreement. They won’t be able to charge you referencing fees, as you are already the tenant, so referencing is now useless. They won’t be able to charge you for any other fees, either, since you can say you didn’t agree to them.

      This all assumes that the tenancy agreement you signed has no mention of the agent, paying fees, etc., so be sure to check it through. But if that is the case, then you can essentially just ignore the agent since you already have a tenancy.

  6. Hi, I am a german student coming to England for a month in April. I´m planing on renting a place on gumtree which requires a security deposit of £800. Now I´m pretty worried, if I pay the money up front from Germany, that the privat landlord rips me off. Do you have any advice what I could do to make the deposit payment as safe as possible? I don´t have the option to go and look at the apatment beforehand. Thank you for your help

    1. Hi Lorraine, Definitely don’t pay any money to anyone before you have viewed the property and ideally seen proof that they are the owner, or have the right to let the property. There are so many scams out there! We’d really recommend viewing a property before paying anything, or signing anything.

      If you find a property through OpenRent.co.uk, then we check that the landlord actually owns the property. We can also collect your deposit and won’t give it to the landlord until after you move in. This protects you from being scammed.

      Best of luck finding a home!

  7. I’ve recently seen a place I want but I believe that it slightly over priced, how can I trust the letting agency to negotiate with with speaking to the landlord. Is there any way around this or is that only possible with places like openrent where one is linked and communicates directly to the landlord?

    1. Hi Gee, unfortunately you can’t trust a letting agent to help you get a lower price. They want to achieve as high a price as possible for their landlord, so it’s not often in their interest to suggest charging less rent.

      One obvious exception is if the price is so overpriced that it is slowing down the let of the property. This makes the agent look bad, so in this case, they may try and suggest the landlord lowers the rent.

      Most letting agents won’t let you talk to the landlord directly (depending on what instructions the landlord gave), but you’re right that OpenRent.co.uk lets tenant’s speak directly to landlords, with no agent getting in the way.

      You can find OpenRent properties here.

  8. I’ve rented a studio flat with a holding deposit fee of £200. On the advertisement it said “all bills included”. It also said that in their description.

    After I paid my holding deposit. I got a call from the agency right away. And they told me I would have to pay a signing up fee of £500. Which I find ridiculous. This was never mentioned anywhere in the description. And they also told me that I will have to pay council tax for £90 which also was never mentioned in the advertisement. They are enclosing hidden fees. A signing up fee for £500 sounds like a scam to me.

    I don’t really know what to do know cause I would really like my £200 back. But I doubt I will get it back now. Is there anything I can do?

    1. Hi Jeanet, I recommend finding out which industry body (e.g. the Property Ombudsman, ARLA, etc.) the agent is a member of. They have codes of conduct for their members. Tell the agent that you will complain to their industry body about the council tax. If they do nothing, go ahead and complain.

      Then, for the signup fee, check the agent’s website and previous communications carefully. If they didn’t mention this £500 fee anywhere, then tell them that it is illegal not to display tenant fees upfront, and that you’re not paying it.

      Keep us up to date!

  9. Hi, I’m considering putting in an offer for a rental however I’ve been told I will need to pay £325 tenancy fee (£200 for myself and £125 for my guarantor) but if my offer is then not accepted will I get this money back?
    Thank you

    1. Hi Rose, that’s a question you need to ask the letting agent/landlord. For any move-in money you pay, you should get, in writing, the terms of how it will be treated.

      In this case, I would ask the agent/landlord to confirm in an email that, if they reject your application, then you will receive all of this money back. This is a big grey area and the government is currently trying to clear it up with the Tenant Fees Ban bill.

      The agent/landlord of the property may be using referencing fees (which they have called ‘tenancy fees’) as a holding deposit. You can read more about how holding deposits work here.

  10. Hi, We currently have a house for a year AST (August 17 to August 18) which has a £1700 deposit.
    We had to pay £1700 holding fee prior to tenancy which then became the deposit.
    Agents then demanded a decision on renewal in November 17 and we paid a holding fee of £200 (total prior to new tenancy being signed) for a years renewal which we paid and agreed to new tenancy for year 2.
    In February 18 they came back and wanted further £1700 holding fee payable to secure second year (same as we had already agreed and paid in Nov).
    We responded by saying we already have their agreement to extend. They have responded by issuing notice seeking possession at the end of year 1.
    Have they a right to demand a holding deposit from existing tenants?
    As we have already agreed to extend and paid them the sum demanded in November 17 we have their offer of tenancy for year 2. Can they go back on this with a notice or is the year 2 tenancy already binding? If so can they still give notice at the end of the first year?

    1. Hi Gary, short answer is, sounds like they’re being very dodgy and I would recommend seeking advice from Citizens Advice or Shelter. If they’ve taken £200 then you need to know how that is going to be treated. If they’re demanding more, then likewise.

      I’ll try and just respond to your two main questions here. The agent may ask for a holding deposit from existing tenants. It’s not something that’s usually done, but it could happen. The important thing is that you have in writing exactly how that holding deposit will be treated under all possible scenarios: most importantly, whether you will be refunded or if it will go towards the rent it at the start of the renewed tenancy in September 2018. You need to get clear about this before you do anything else.

      You’ve already paid £200 – did you get them to tell you in writing exactly how it will be treated in all possible circumstances: (1) if the tenancy goes ahead, (2) if you pull out (3) if they pull out. If not then you need them to clarify this immediately. If they have served you notice, then they probably need to pay you back that £200, because you paid that to secure the renewal (even though that is a very unusual thing to do) and now they’re pulling out.

      The second year is not already binding – you haven’t signed anything and they’re serving you notice, which suggests they don’t want you to stay in the property. To renew the tenancy, you will both have to sign another tenancy agreement contract.

      This is quite a complex case, but luckily you have months to sort it out, so make sure you seek advice from one of the bodies listed here.

  11. Hi.Before o moved in the property i pay £350. For holding Then when i move in i pay £2800. Thats £1200. deposit £1200. Month rent and the other £400. For fees but on my tenancy agreement doesn’t show the deposit . Just say £1200 montly, how do i know if i have my deposit secure? Thank you

    1. Hi Roberto. When you pay a tenancy deposit, the landlord has 30 days to serve you with the prescribed information about how they are protecting your deposit. If it has been more than 30 days then the landlord might be liable to pay you up to three times the the amount of the deposit (i.e. £1,200*3 = £3,600).

      I suggest getting in touch with them to find out which the scheme they used to protect your deposit. If the 30 days is up, then you can get your deposit back by following the instructions on this page.

  12. Hello,
    We found a property we like after searching for ages. Thr room was advertised for £200 a week inclusive of all bills, garden, living room, en-suite in Zoopla and Rightmove. However, when we went to view the property we were quoted a higher price of £220 a week. When we query it we were told the £200 a week room had gone which was a lie because we view all the rooms in the house none of them looked like the one advertise execpt the one that was shown to us.

    Further, there was no garden, living room and is not en-suite. When we ask Why, we were told the landlord changed his mind and turn the living room to a studio flat. The original advert is still in Zoopla and rightmove to date. Nevertheless, because we were so much in love with the house and location we went ahead and put a hold of a week rent of £220 on it. After waiting for almost two weeks we receive an email telling us to pay additional charges toward towards communal cleaning.

    Now this has gone beyond our budget plus we were not told of this additional charges before we put a hold on it. We are also weary of the landlord and agent because several changes have occurred or shall l call it false advertisement.

    Are we able to get our holding fee back? I am also wondering if it is legal for landlord or agent to advertise what they cannot provide.

    I look forward to your response.

    Thank you.
    Ave

    1. Hi Ari, thanks for raising this important point!

      The following are against consumer protection law guidance as described by the Competition & Markets Authority:

    2. Advertising a property at one price and then offering at a higher price
    3. Advertising a room/property that is not available
    4. It sounds like this landlord has not acted properly and if possible, it would seem sensible not to proceed with the tenancy.

      If you ask for your holding deposit back while referencing the above two points, then they may be inclined to give you it instead of facing penalties for these actions.

      You can also make a complaint to the redress scheme of which the agent is a member. This should be visible on their website or other communications.

  13. Hi,

    I paid a holding fee on my rented flat and saw that it was still advertised but did not say anything as l did not want to up set the apple cart. See two months down the line it is still being advertised
    . Please may l have some advise

  14. I pay a holding deposit but i haven’t sind the aplication form with landlord send me i don’t want to give him all my personal details after 2 days i told him that i don’t want the room and now he don’t want to give mi deposit back

  15. Hi. I applied and was accepted to rent a property and paid bond and first month rent today and going in to sign tanancy tomorrow. But i have decided i no longer want to move, will i get the money back for bond and 1st month rent as havent signed a tenancy??
    Thanks.

Leave a Reply

Your email address will not be published. Required fields are marked *