We’ve all seen those Landlord UK Facebook group posts that spark a debate—like this one: “I’m offering my existing tenant a 50% bigger flat for just £25 more pcm, no notice needed. But they’re on holiday for 3 weeks. Can I ask for a holding deposit to show commitment and take it off the market? I’d deduct it from the first month’s rent.” If you’re a North East landlord with properties in areas like Sunderland or Durham (where upgrades can boost yields from 7-10% by attracting loyal tenants), this is a smart move to retain good renters. But with the 2025 Renters’ Rights Bill emphasizing fair practices, getting the holding deposit right is crucial to avoid fines (£5,000+ for banned fees). Let’s unpack this engagingly—think of it as your roadmap to commitment without complications, with step-by-step solutions, legal insights, and North East tips to keep your portfolio thriving.
The Issue Breakdown: Holding Deposits for Upgrades and Holidays Offering a bigger flat to an existing tenant is a win-win: They get more space for minimal extra cost, you avoid voids (average 5-7% in North East per Zoopla) and re-letting fees (£200-£500). The catch? Their 3-week holiday delays signing, risking lost interest from other applicants (e.g., the 2 suitable ones mentioned). A holding deposit can secure their intent, but under the Tenant Fees Act 2019 (still key in 2025), it’s capped at 1 week’s rent and must follow strict rules. It’s for reserving a property before a new tenancy agreement, and since this is a new flat (new contract), it applies—even for existing tenants. But you can’t charge arbitrarily; it must be refundable or applied to rent/deposit, with a 15-day deadline to agree terms (or refund). Pros: Shows commitment, lets you pause marketing. Cons: If they back out without fault, refund fully; mishandle and face penalties.
Step-by-Step Solutions: Charging a Holding Deposit Legally and Fairly Here’s how to handle it compliantly, with North East costs (e.g., lower legal fees £800-£1,200 vs. UK £2k) and tips for pros like doctors (time-saving) or accountants (tax-smart).
- Confirm It’s Allowed and Cap It Right (Prep: Now) Yes, you can charge a holding deposit for the new flat as it’s a new tenancy. Cap at 1 week’s rent (e.g., £150 for £650 pcm North East avg). Explain it’s to reserve, refundable if you don’t proceed, or deducted from first rent/deposit if they do. Get written agreement (email/text) before taking payment—include terms, deadline (15 days default), and refund scenarios. Pro Tip: Use a template from NRLA (£20 membership) to stay compliant.
- Communicate Clearly While They’re Away (Prep: 1-2 Days) Contact via email/WhatsApp: “Excited about the bigger flat! To hold it for 3 weeks, a £[amount] holding deposit shows commitment—fully deducted from first rent. Agree?” Attach a simple form. If they say yes, take payment (bank transfer, not cash to track). Pause ads, but note to other applicants: “Under offer, but backups welcome.” Risks: If no agreement by deadline, refund and re-market. North East Hack: In areas like Peterlee, quick re-lets (7-10 days avg) minimize losses.
- Handle the Deposit Properly (During Holiday) Hold for up to 15 days (or agreed extension). If they commit post-holiday: Apply to rent/deposit. If they pull out (no false info): Refund full. If you decide not to proceed (e.g., refs fail): Refund. Keep records—HMRC audits could query. For pros: Apps like GoCardless (£1/transaction) automate secure payments.
- Alternatives If Holding Deposit Feels Risky (If They Hesitate)
- Written Intent: A non-binding email/letter of intent—shows commitment without money.
- Reservation Fee (Avoid): Banned under Tenant Fees Act—stick to holding deposit.
- Keep Marketing: Hold off offers but continue viewings—first-come basis.
- Agent Help: Use a North East agent (£100-£200 fee) to manage—ideal for busy landlords. Story: A Sunderland landlord offered an upgrade, took a £120 holding deposit—tenant committed post-holiday, seamless switch, yields up 2%.
- Prevention and Post-Move Tips: Build Loyalty Screen upgrades carefully—check affordability (£25 more = minimal risk). Use AST addendums for seamless transfers (no new deposit if protected). North East: Factor low rents (£600-£800 pcm) into caps. Pro Tip: For doctors/devs, automate with Landlord Vision (£10/month). Aim for zero voids—re-let in 5-7 days avg.
Real Win: A Durham landlord used a holding deposit for a holidaying tenant—secured the upgrade, avoided £500 void costs, boosted yields to 9%.
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