Failed Referencing: Can You Keep the Holding Deposit?

A failed reference check does not automatically let a landlord keep a holding deposit in England. The reason the application failed matters. An applicant who disclosed their circumstances accurately is in a different position from someone who supplied materially false information. A referencing provider's rejection is a screening result, not a decision about who owns the deposit.

This guide covers holding deposits under England's Tenant Fees Act 2019. It does not cover tenancy security deposits or the different rules in Scotland, Wales and Northern Ireland. Use the current official guidance for a live dispute.

Start with what the payment was for

A holding deposit reserves a property while the parties work towards a tenancy. Under the government's guidance on permitted tenancy fees, the cap is one week's rent for the tenancy, not one week's rent from each joint applicant. Landlords do not have to take one. It is separate from the security deposit held during a tenancy.

Calling the payment an administration charge does not create permission to charge it. For covered arrangements, tenant referencing and administration are not additional permitted fees. Nor does a signed statement saying the holding deposit is always non-refundable override the statutory refund rules. Check the payment receipt, the agreement and the actual reason for retaining money separately.

Separate failed references from misleading information

The Tenant Fees Act's explanatory notes on holding deposits describe an exception for false or misleading information that materially affects suitability and that the landlord is reasonably entitled to consider. The exception is not simply that the landlord dislikes the outcome of a check.

• Accurate disclosure, unsuccessful application: the applicant gives their actual income, but the landlord decides it is insufficient. That alone does not establish grounds to keep the deposit.
• Materially inaccurate disclosure: the stated income is substantially higher than the evidence supports. Examine the actual discrepancy and its effect before deciding whether the statutory exception applies.
• Minor error: an irrelevant misspelling should not be treated as a reason to retain money.
• Unclear question: ask what the applicant understood and preserve the original wording. Do not rewrite the question after receiving an unwelcome answer.

Be careful with the shorthand that only a deliberate lie counts. The government's statutory guidance gives a materially inflated income caused by a typo as an example that can matter. Equally, a small income error that makes no difference to affordability does not justify retention. Review the particular facts rather than relying on either absolute claim.

Check the other exceptions and the deadline

Other exceptions concern an applicant withdrawing, failing to take reasonable steps to enter the tenancy when the landlord has taken reasonable steps, and certain failed Right to Rent checks. The Right to Rent exception includes a condition about what the landlord or agent knew, or could reasonably have known, before accepting the deposit. Do not equate a credit check with a Right to Rent check.

England's Tenant Fees Act enforcement guidance sets a default agreement deadline of 15 days after receipt, unless the parties agree another period in writing. If the landlord declines the tenancy, a refund is normally due within seven days of that decision. If no agreement is reached by the deadline, the refund is normally due within seven days of the deadline, subject to the statutory exceptions.

Written reasons for retention must be given within seven days of the decision not to grant the tenancy or the agreement deadline, as applicable. Missing that requirement means the deposit must be returned. A provider's slow response is a reason to track the deadline, not to leave the applicant's money in limbo. Record any agreed extension before relying on it.

What if the advert stayed online?

Schedule 2, paragraph 13 of the Tenant Fees Act limits the withdrawal and failure-to-take-reasonable-steps exceptions. Those grounds cannot justify keeping the deposit if, before the agreement deadline, the landlord or agent imposes a payment or other requirement prohibited by the Act, or behaves in a way that makes it unreasonable to expect the tenant to enter the tenancy.

A live advert can understandably make an applicant question what the deposit achieved. Preserve any promise to remove the listing and investigate whether the agent acted on it. Continued marketing may be relevant to that assessment, particularly if the property was promised to be reserved. An advert screenshot alone does not establish whether the landlord's conduct meets that test. Consider what was agreed and what happened alongside the statutory refund grounds.

The Act restricts taking another holding deposit for the same property while an earlier one remains unresolved, subject to the rules for repayment or lawful retention. Keep a single record of the property's reservation status. If an agent manages the advert and the landlord handles applications, agree who updates each system so applicants do not receive conflicting messages.

Make the decision traceable

1. Record the amount received, receipt date, agreed rent and agreement deadline.
2. Keep the questions asked, the applicant's answers and the relevant referencing result.
3. Identify who ended the application and why. A landlord's refusal is not automatically an applicant's withdrawal.
4. Check the exact legal basis for retaining anything, including written-notice requirements.
5. Return the payment when due, or communicate a supported retention decision within the required period.

If the tenancy proceeds, agree whether the holding deposit will be refunded or credited towards rent or the tenancy deposit. Do not silently treat it as an extra charge. If there is a dispute, England's official tenant guidance identifies the local council and First-tier Tribunal as routes for challenging prohibited retention. Keep the documents needed to explain the timeline.

Reduce uncertainty before money changes hands

Explain the rent, intended move-in date, requested references and application stages before asking for a holding deposit. Give applicants a chance to flag an issue instead of discovering a known mismatch after payment. Ask clear, relevant questions consistently and distinguish an initial enquiry from a formal referencing decision.

RentForms can collect those initial responses before a viewing and keep them together for review. It does not run reference checks, collect holding deposits or determine whether retention is lawful. The useful role of pre-screening here is a clearer conversation before the landlord and applicant make financial commitments.