Holding Deposit Rules in Wales: Cap, Deadline, and Refund Requirements

Two Deposits, Two Sets of Rules

Welsh housing law draws a sharp line between holding deposits and security deposits, and the rules for each are fundamentally different.

A holding deposit is money a prospective contract-holder pays to reserve a property before signing an occupation contract. Under Schedule 1, paragraph 4(c) of the Renting Homes (Fees, Discrimination etc.) (Wales) Act 2019, a holding deposit in Wales must not exceed one week's rent.

A security deposit is money paid in connection with an occupation contract as security against the contract-holder's obligations. Unlike England — where the Tenant Fees Act 2019 caps security deposits at five or six weeks' rent — Wales has no statutory cap on security deposits. The enabling provision exists in the 2019 Act, but Welsh Ministers have never exercised the power.

This means a landlord in Wales can lawfully agree to any security deposit amount, provided the entire sum is protected in an authorised scheme within 30 days of receipt.

The Holding Deposit Timeline

When a landlord accepts a holding deposit, a set of deadlines begins:

Day 1: Holding deposit is received. The "deadline for agreement" — a 15-calendar-day window — starts running under Schedule 2, paragraph 2(1) of the 2019 Act. The parties can extend this window by mutual written agreement before it expires.

Refund deadline: If the occupation contract is signed, or if the deadline for agreement passes without a contract due to landlord default or no fault of the applicant, the landlord must refund the holding deposit in full within seven calendar days of that event.

Alternatively: The holding deposit can be applied toward the first rent payment or toward the security deposit, but only with the contract-holder's explicit consent. If applied to the security deposit, the 30-day protection clock under Section 45 of the 2016 Act starts on the date of allocation.

When Retention Is Lawful

A landlord may keep a holding deposit only under specific statutory grounds in Schedule 2:

• The prospective contract-holder provided false or misleading information that materially affected the decision to let
• The prospective contract-holder explicitly told the landlord they no longer wish to proceed
• The prospective contract-holder failed to take reasonable steps to enter into the contract before the deadline

Before retaining any funds, the landlord must provide a written explanation of the reasons within seven calendar days. Failing to do so forfeits the right to retain the money permanently.

The England/Wales Confusion

Landlords with properties on both sides of the border frequently misapply English rules in Wales. The main differences:

Assuming a five-week cap in Wales leaves money on the table for higher-risk lets. Assuming no holding deposit cap in Wales creates a prohibited payment offence.

Transitioning a Holding Deposit to a Security Deposit

The practical sequence for converting a holding deposit to a protected security deposit:

1. Obtain the contract-holder's written consent to apply the holding deposit toward the security deposit
2. Record the allocation date — this starts the 30-day protection clock
3. If additional security deposit money is paid on the same or a different date, each payment triggers its own 30-day deadline
4. Protect the total security deposit in an authorised scheme and serve required information within 30 days of the allocation date

The Wales deposit protection guide includes a holding deposit agreement template and a timeline tracker for managing both the 15-day holding deadline and the 30-day protection deadline.

See more Wales guides →