What Are Holding Deposits? A Guide for Landlords in Cardiff, Newport & South Wales

What Is a Holding Deposit?

A holding deposit (sometimes called a holding fee) is paid by a prospective tenant when they apply for a rental property. It secures the property while referencing and checks are carried out.

Once received, the landlord or letting agent must remove the property from the market while the application progresses.

By law, a holding deposit can be no more than one week’s rent.

This is different from a tenancy deposit, which is paid before move-in.

Holding Deposit vs Tenancy Deposit (Wales)

It’s common for landlords to confuse the two.

Holding Deposit	Tenancy Deposit
Paid at application stage	Paid before move-in
Max one week’s rent	Typically around one month’s rent in Wales
Not protected in a deposit scheme	Must be protected in an approved scheme
Secures the property during checks	Protects against damage or arrears

In Wales, tenancy deposits must be protected within 30 days in a government-approved scheme.

What Happens After a Holding Deposit Is Paid?

Once the holding deposit is received:

1. Referencing and affordability checks are carried out
2. The tenancy agreement is prepared
3. A move-in date is agreed

A deadline of 15 days applies to reach an agreement (unless extended in writing).

Can a Landlord Keep the Holding Deposit?

A landlord or letting agent in Cardiff or Newport can only retain the holding deposit in specific circumstances:

• The tenant provides false or misleading information
• The tenant fails Right to Rent checks
• The tenant withdraws from the application
• The tenant fails to take reasonable steps to enter the tenancy

If the landlord decides not to proceed, the deposit must be returned.

Failing affordability checks alone does not automatically allow you to keep the holding deposit.

When Must a Holding Deposit Be Returned?

The holding deposit must be returned within 7 days if:

• No agreement is reached within 15 days (and it’s not the tenant’s fault)
• The landlord withdraws
• The tenant successfully moves forward — the amount is usually deducted from the first month’s rent

Are Holding Deposits Banned by the Tenant Fees Act?

No.

The Tenant Fees Act 2019 banned most tenant fees but specifically allows holding deposits because the tenant gets the money back.

Why Holding Deposits Matter for South Wales Landlords

For landlords using a property management company in South Wales, holding deposits:

• Prevent time being wasted on unreliable applicants
• Reduce financial loss from withdrawn applications
• Ensure commitment from prospective tenants
• Allow properties in Cardiff and Newport to be taken off the market confidently

Advice from Redkey Property Management

At Redkey, we guide landlords across Cardiff, Newport, and South Wales through compliant holding deposit processes to protect both landlord and tenant.

If you need help managing applications for your rental property, our team is here to help.

📞 01633 387970
📧 hello@redkeylets.co.uk

FAQs – Holding Deposits for Landlords

What’s the difference between a holding deposit and tenancy deposit?
A holding deposit secures the property during referencing. A tenancy deposit protects the property during the tenancy.

Can I keep the holding deposit if a tenant fails referencing?
Only if they provided false information or withdraw.

When should I return a holding deposit?
Within 7 days if the agreement doesn’t proceed for reasons outside the tenant’s control.

Are holding deposits legal in Wales?
Yes, and widely used by letting agents and landlords.