Property management & leasing
Holding Deposit: Definition & Example
What Is a Holding Deposit?
A holding deposit is money an applicant pays to take a rental unit off the market while their application is processed or until the lease is signed.
What does holding deposit mean?
A holding deposit reserves a specific unit for a short time. If the applicant is approved and signs the lease, the deposit is usually applied to the first month’s rent or the security deposit. If the landlord denies the application, the deposit is typically refunded.
The hard question is what happens if the applicant backs out. Many landlords keep some or all of the holding deposit to cover rent lost while the unit was off the market, but several states limit how much can be kept or require a written agreement explaining the terms.
A holding deposit should be documented in writing, including the amount, how long the unit will be held, and the conditions for a refund.
Holding deposit example
An applicant pays a $500 holding deposit on a Friday. The landlord agrees in writing to hold the unit for seven days while screening is completed. The applicant is approved and signs the lease the next Wednesday, and the $500 is credited toward the security deposit.
Related terms
- Security DepositA security deposit is money a tenant pays a landlord at the start of a lease, held to cover unpaid rent or damage beyond normal wear and tear when the tenant moves out.
- Application FeeAn application fee is a charge a landlord or property manager collects when someone applies to rent, usually to cover the cost of screening and processing the application.
- ApplicantAn applicant is a person who formally asks to rent a property, borrow money, or join a program by submitting an application and the information the decision-maker requests.
- Lease AgreementA lease agreement is a contract between a landlord and tenant that sets the rent, the term, and the rules each side must follow while the tenant occupies the property.
Holding deposit FAQ
- Is a holding deposit refundable?
- Usually if the landlord denies the application, and often not if the applicant changes their mind. The written holding agreement and state law control.
