Try as you might, there’s just no getting away from deposits when you rent a home. They are to renting what death and taxes are to life. So if you can’t beat them, you might as well understand how they work and avoid any complications or surprises during the process of renting a home.
From security deposits to holding deposits and everything in between (did someone say zero deposit?), you want to make sure that you know where your money is going and what it’s for. That’s why we’ve put this guide together on everything you need to know about deposits when renting a home.
How many deposits do I need to rent a home?
The first lesson of deposits is that there are loads of them. Ok, there aren’t loads, but there are two, which can feel like two too many. Anyway, that’s just how it is, and it’s helpful if you familiarise yourself with each one.
The more straightforward of the two, a holding deposit requires you to pay one week’s worth of rent to secure your new home once an offer is accepted.
The landlord (or letting agent) will ask for the holding deposit after the basics of the rental are agreed. These include things like setting the move-in date, length of stay and how many people are moving in.
You’ll then be required to pay one week’s rent, at which point the landlord or agent removes the property from the rental market. If all goes well and you move into the home, the deposit is deducted from the first month’s rent, and you won’t be out of pocket.
If you don't move into the home because you didn't pass referencing or the landlord changed their mind, then you can expect to get your holding deposit back. If, however, you decide not to move, it's unlikely that you will get it back.
The security deposit is a little bit more complicated and involves substantially more money than a holding deposit. Before you move into your new home you’ll need to pay the landlord a security deposit that amounts to five week’s worth of rent.
It’s a significant chunk to relinquish up front but is a requirement from most landlords before you move in. The deposit does what it says on the tin and offers the landlord increased security just in case you cause any damage while living in their property.
Landlords must register the deposit with an official scheme, in the event of any disagreements when you move out. If the landlord withholds some – or all – of the deposit and you disagree with their decision, you can appeal, at which point the tenancy deposit scheme steps in and makes a final, unbiased decision.
Is there an alternative to the security deposit?
Paying five week’s worth of rent is a big chunk of money. Let’s say you rent a home for £1,500 per month. That would mean paying a deposit of £1,730. A home priced at £2,500 per month would see you paying £2,885 upfront. It’s a lot of money and can leave renters thousands of pounds out of pocket before they even get the keys to their new place.
While most landlords require a security deposit, there is another option on the market which is growing in popularity. The Zero Deposit Scheme sees you paying a one-off, non-refundable fee of one week’s rent. This gives both you and the landlord the exact same protection as a regular deposit, just without the large sums of money upfront.
Many Build-to-Rent communities implement a zero or no-deposit scheme. A growing number of landlords are also happy to use the scheme, as it’s popular with renters and increases the number of people who may want to move into their home.
Do I have to pay a deposit?
Legally, you aren’t required to pay any type of deposit, and a landlord doesn’t need one in order to rent their property to you. However, finding a landlord or even Build-to-Rent community that doesn’t require any form of deposit is a bit like trying to find a small needle in a giant haystack.
They may offer the Zero Deposit Scheme, but you won’t be able to rent a home without providing some form of security if the landlord asks for it – and you can bet that they will. Therefore, you should expect to pay both a holding and security deposit before you move into your new home.
Deposit this and deposits that
Understanding how deposits work is a vital part of renting a home, and the more you know, the better equipped you’ll be to move into your new place without a hitch. The next time a landlord or agent brings up deposits, you can confidently navigate the situation, asking questions if necessary and generally feeling much more confident about your move.