Do I get my deposit back if the sale falls through?

The word "deposit" covers two very different payments, and whether you get it back depends entirely on which one you have paid. A holding deposit, paid to a landlord or letting agent to take a property off the market while checks are done, is capped at one week's rent in England and Wales and is banned in Scotland¹. A mortgage deposit, the money you put towards buying a home, is not handed over at all until contracts are exchanged, so a sale that collapses before that point normally leaves it untouched².

The deadlines are short and specific. Where a holding deposit has to be returned, government guidance says it must be given back within 7 days³. There are 15 days from paying a holding deposit to agree a tenancy⁴. If the landlord decides not to offer a contract, the money is normally returned within 7 days of that deadline⁵.

The rest of this page sets out which payment you have made, when each one comes back, the situations in which a landlord or agent can keep a holding deposit, and what to do if money is kept unfairly.

Holding deposit or mortgage deposit: which one you have paid

These are separate payments with separate rules, and mixing them up is the main reason people expect money back that was never refundable, or give up on money they were entitled to.

A holding deposit is the smaller sum. It is paid to a landlord or letting agent to reserve a rental property while they check your references, income and right to rent. It is not the same as a tenancy deposit, which is the larger security sum paid when you sign, and it is not the same as rent in advance.

A mortgage deposit is the money you put towards the purchase price of a home. It is based on the lower of the property's purchase price or its valuation⁷. On a £300,000 property, a 5% deposit is £15,000, a 10% deposit is £30,000 and a 15% deposit is £45,000⁸. On a £300,000 house a 5% deposit is £15,000, and on a £350,000 house it is £17,500⁹.

The critical difference is timing. A mortgage deposit is paid through your solicitor, and it goes to the seller, when you exchange contracts². Before that point it sits with you or your solicitor, which is why a sale that falls through early does not usually cost you the deposit itself.

When a holding deposit must be refunded

The default position is that you get the money back. Government guidance for tenants sets out a short list of situations in which a landlord or agent may keep a holding deposit, and everything outside that list means a refund³.

Your holding deposit should be returned if you gave accurate information when you paid it¹⁰. That is the test that matters most in practice: if the checks fail because of something you told the truth about, the money comes back. The landlord or agent must usually return your holding deposit even if you do not pass a credit or income check, or they are not happy with your references¹⁰.

The same principle applies to immigration checks. If you do not pass an immigration check, the landlord or agent can only keep your holding deposit if they write to you within 7 days to say why; otherwise they must return it¹¹.

In Wales, the position is set out in the same terms. The holding deposit is normally returned within 7 days of the deadline for agreement if the landlord decides not to offer a contract⁵. If a holding deposit is paid and the right information is not given, the landlord or agent must pay it back⁵.

When a landlord or agent can keep your holding deposit

There are four situations in which a holding deposit can be kept, and they all turn on something the tenant has done³:

• You give false or misleading information to try to get the tenancy
• You change your mind and decide not to rent that property
• You do not reply to requests for information, documents or action
• You fail a Right to Rent check

In Wales the rule is expressed slightly differently but covers the same ground: your landlord or agent can normally keep the holding deposit if you decide not to go ahead with the occupation contract, or if you fail to take reasonable steps to enter into one by the deadline⁵. Even then, they can only keep it if they gave you all the required information about the deposit before you paid it⁵.

Keeping back information is the risk that catches people out. You could lose your holding deposit if you keep back information¹². A tenant who mentions a poor credit history up front is in a stronger position than one who does not, because the refund rule turns on honesty rather than on passing.

The wider principle behind deposit retention is that a landlord or agent is only entitled to keep all or part of a security deposit if they can show that they have lost out financially because of your actions¹³. That is the standard for the tenancy deposit paid at the start of a tenancy, and it is a useful benchmark for judging whether a retention is fair.

Holding deposit limits: one week's rent in England and Wales

Holding deposits are capped at one week's rent in England and Wales but are banned in Scotland¹. The cap applies per tenancy, not per tenant: the maximum holding deposit you can ask for is equivalent to one week's rent¹⁴.

Working out the figure is straightforward. The method given in guidance is monthly rent multiplied by 12, divided by 52¹⁵. Welsh government guidance gives a second method for rent charged monthly: divide the monthly rent by 4.35⁵.

In Scotland, the practical test is what happens to the money. If you are asked to pay a holding deposit before signing a tenancy agreement, check that it will be put towards the deposit when the tenancy starts, or refunded if you do not get the tenancy; if the money is not refundable this is unlawful¹⁶.

The Scottish government has said it plans to introduce a deposit return scheme in Scotland in October 2025¹⁷. That is a separate scheme from the tenancy deposit protection arrangements that already apply, and it does not change the ban on holding deposits.

Your mortgage deposit is not handed over until contracts are exchanged

For a home purchase, the deposit leaves your control at exchange of contracts, and not before. Exchanging contracts is the moment when your buyer pays a deposit and things become legally binding¹⁸. The mortgage deposit is paid through your solicitor, and goes to the seller, when you exchange contracts².

That means you need your deposit money ready and accessible before you exchange contracts¹⁹. Money tied up in an account you cannot reach quickly is a problem at exactly the wrong moment.

Before exchange, a buyer who walks away is not handing over the deposit. After exchange, the position changes sharply. If you pull out of the sale at that point, you may lose the deposit you put down and could be sued by the seller²⁰. From the seller's side, if the buyer pulls out of the sale after contracts were exchanged, you can sue them for any loss this causes you and you may be able to keep the deposit²¹.

Reservation fees and booking fees on a new build

A reservation fee is not a holding deposit and does not follow the same rules. Under the Older Persons Shared Ownership scheme, the fee is taken off the final amount you pay on the day you buy the home, but if you do not buy the home you will not usually get a refund for the fee⁶.

A mortgage booking fee behaves the same way. It is not refundable even if your house purchase falls through²².

The distinction matters because buyers often assume any money paid early in a purchase is recoverable. Reservation and booking fees are payments for work or for reserving a product, and the refund rules that apply to holding deposits on rentals do not reach them.

Getting a holding deposit back if it is unfairly kept

Start with the deadline. If the money should have come back and has not, the first step is a written request to the landlord or letting agent setting out the date the deposit was paid, the amount, and why you believe it is repayable. Government guidance is clear that the return must happen within 7 days where it is due³.

If the deposit is not returned, the routes depend on where you are:

1. Check whether the landlord or agent gave you the required information about the deposit before you paid it. If they did not, they must pay it back⁵.
2. Put the request in writing and keep a copy, including the date you paid and the amount.
3. If the money is still not returned, raise a complaint through the letting agent's internal complaints procedure.
4. If that does not resolve it, take the complaint to a redress scheme or, for a letting agent in England, the relevant ombudsman route.

For a tenancy deposit rather than a holding deposit, the position is different and better documented. Your landlord must give you separate written information saying which scheme is protecting your money, when your landlord could keep your deposit, and how to get your deposit back when the tenancy ends²³. If a deposit is not protected when it should be, that is a separate complaint with its own remedies²⁴.

Where rent arrears are the reason money is being withheld, free and impartial debt advice is available from Business Debtline and National Debtline, both of which publish guides for private tenants²⁵.

Where the rules differ across the UK

The holding deposit rules are not uniform, and the differences are large enough to change what a tenant can expect to pay.

In Scotland, the check to make is whether the money is refundable at all. Scottish guidance says that if you are asked to pay a holding deposit before signing a tenancy agreement, check that it will be put towards the deposit when the tenancy starts, or refunded if you do not get the tenancy, and that if the money is not refundable this is unlawful¹⁶.

For a home purchase, the exchange of contracts rule applies across England and Wales, and the consequences of pulling out after exchange are set out in the same terms²⁰. Buying in Scotland works differently, with a different offer and conclusion of missives process, and the deposit position follows that process rather than the English exchange model.

What happens to the money once you sign

Once a tenancy is agreed, the holding deposit normally stops being a holding deposit. You can put your holding deposit money towards a security deposit or first rent payment if you agree⁴.

From that point the money is a tenancy deposit, and different rules apply. It is returned when the tenancy ends as long as no rent is owed and the property is left in the same condition as when the tenant moved in¹³. It is usually returned when the tenancy ends²³.

There are limits on what can be deducted. A landlord or agent is only entitled to keep all or part of a security deposit if they can show that they have lost out financially because of your actions¹³. Leaving without ending your tenancy properly is a different matter: you will probably lose some or all of your deposit if you leave without ending your tenancy²⁷.

For a home purchase, the deposit has done its job at exchange. It is applied to the purchase price at completion, and the sale completes on the terms agreed.

If the purchase falls through before exchange

A purchase that collapses before exchange normally leaves the mortgage deposit where it is. The deposit has not been handed over, so there is nothing for the seller to keep.

What you may lose instead are the costs already incurred: searches, survey fees, and legal work done up to that point. Those are separate from the deposit and are not usually recoverable from the other side.

Two situations change the picture. The first is a purchase abroad, where in some countries the deposit is non-refundable, so no money should be handed over before an initial contract has been negotiated²⁸. The second is a purchase that falls through after exchange, where the deposit is at risk and the seller may also have a claim²⁰.

If you are buying again after a repossession, the deposit requirement is likely to be higher and the interest rate higher as well²⁹. On a £250,000 house a 10% deposit is £25,000⁹.