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Taking deposits

You don’t have to ask for a tenancy deposit but it can give extra security. If you take a deposit, you must protect it in a deposit protection scheme.   

This information is for private landlords.

You don’t have to ask for a tenancy deposit but it can give extra security. If you take a deposit, you must protect it in a deposit protection scheme.   

You don’t need to protect a deposit if the tenant paid it before April 2013.  

Deposit amount

From 1 April 2023, you cannot ask for more than one month's rent as a deposit. If you ask for more than one month's rent, this is an offence and you could get a fine of up to £500. 

Asking for a deposit in a form other than money, such as goods or property, is an offence. If you ask your tenant for a non-monetary deposit you could get a fine of up to £500 or be prosecuted. 

What the deposit covers

The deposit is the tenant’s money. You can only keep it if you can show that you have suffered a financial loss because of the tenants’ actions.  

Landlords generally take a deposit to cover issues such as:  

  • unpaid rent or arrears 
  • damage to the property 
  • missing or broken furnishings 

Your tenancy agreement should have a clear term on what the deposit covers. If it doesn’t include this information, you may find that the deposit is returned to the tenant.  

Make sure you have a detailed inventory to prevent deposit disputes later on.  

Deposits paid in instalments

Some tenants may find it difficult to pay a months’ deposit upfront. You can consider allowing your tenant to pay the deposit in instalments over a period of three or four months.  

If you decide to accept a deposit in instalments, make sure to:  

  • get the agreement in writing 
  • give tenants a receipt for each payment 
  • protect the initial deposit and top up with further instalments 

Holding deposits

Some landlords or estate agents ask for a holding deposit before a tenancy begins. In return, they agree to stop marketing the property. 

A holding deposit is not a tenancy deposit and doesn’t need to be protected. If you ask for a holding deposit, you should provide: 

  • a receipt for the amount paid 
  • a written description of the fee and what it can be used for 
  • written terms outlining if and how the deposit can be returned 

A holding deposit becomes a tenancy deposit once you agree with the tenant to set up a tenancy. At this stage, you must protect the deposit.

If you decide not to go ahead with the tenancy you should return the holding deposit.  

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