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Costs of housing and help with costs

This content applies to England

This page looks at paying for accommodation in the private rented sector, with particular reference to ent in advance, deposits, and premiums, and sources of financial help to pay rent, rent in advance and deposits.

Rent in advance

Some private landlords require rent to be paid in advance (ie before it is due) before the tenant can move in. Landlords will vary as to how much rent in advance (if any) they will demand of a prospective occupier. Landlords are free to ask for any amount.

Holding deposit

A holding deposit is a sum of money paid to a landlord or letting agent to secure accommodation prior to the signing of a tenancy agreement.

From 1 June 2019, new provisions relating to holding deposits were introduced under the Tenant Fees Act 2019. These include a cap (equivalent to one week's rent), a deadline for agreement and rules governing the return of a holding deposit. The provisions affect a holding deposit taken in connection with an assured tenancy, licence or tenancy granted to a student by a specified educational institution.

A binding contract?

Payment and acceptance of a holding deposit may create a conditional binding contract between tenant and landlord/agent, under which:

  • the tenant agrees to provide honest representations as to their income, tenancy history and references, and to enter into the tenancy on the terms agreed with the landlord
  • the landlord agrees to enter into the tenancy as per the agreed terms conditional on satisfactory fulfilment of all pre-tenancy checks.

The property, the amount of rent and the move-in date must be precisely identified in the agreement. If not, the contract might not be binding.

A holding deposit agreement made by agents on behalf of a landlord will usually also bind the landlord.

Some holding deposit agreements may include the phrase 'subject to contract'. This could be intended to mean that the agreement is not in fact a contract. A prospective tenant should inquire as to the meaning of the phrase if it appears on the agreement. However, the words will have no effect if the true intentions of the parties are that the holding deposit should be binding.

Agreeing the terms

The landlord/agent and prospective tenant must agree the terms of the tenancy prior to exchanging the holding deposit, and cannot renegotiate them once the deposit has been exchanged. If the landlord or agent subsequently revokes the offer to enter into the tenancy or varies its terms this will amount to repudiation of contract and give rise to contractual remedies such as injunctions for specific performance and/or damages for breach of contract.

Right to cancel

If the tenant's references prove unsatisfactory, the landlord has a right to cancel the contract but (provided the applicant has not misled the landlord) must usually refund the deposit. If the applicant has not been truthful, the deposit will be forfeit to the extent necessary to cover the landlord's costs. Where a third party referencing agency recommends that an applicant who has failed its credit referencing checks (but who has been honest about their income and credit history) is not accepted as a tenant, this does not automatically give a landlord a right to cancel the contract.

After the tenancy starts

After the tenancy starts, the holding deposit is usually credited to the tenant's rent account and put towards the first month's rent. Alternatively, when this is not the case and the holding deposit is not repaid to the tenant, it will become a tenancy deposit which, if the tenancy is an assured shorthold tenancy, will need to be protected in accordance with the tenancy deposit protection legislation.

A 'non-returnable holding deposit' is effectively a premium or an agency fee (see below).

Government guidance for lettings professionals on consumer law advises on fairness in relation to holding deposits.[1]

Tenancy deposit

A tenancy deposit is a sum of money that a landlord (or an agent acting on behalf of a landlord) can request at the beginning of a tenancy to act as security against incidences such as non-payment of rent, damage to property or removal of furniture.

From 6 April 2007, a tenancy deposit for an assured shorthold tenancy must be protected in a Government-approved scheme.

From 1 June 2019, a tenancy deposit for an assured shorthold tenancy, licence or tenancy granted to a student by a specified educational institution entered into on or after that date is capped at the equivalent of five or six weeks' rent (depending on the annual rental).

Deposit replacement insurance

Deposit replacement insurance policies are marketed as an alternative to tenancy deposits. They are sometimes referred to as ‘smart deposits’.

Either the landlord or the tenant may take out the policy. A tenant may be asked to take out a policy rather than pay a tenancy deposit. If the landlord takes out the policy they may recoup the money through the rent or a regular payment on top of the rent.

If money is owed to the landlord after the tenancy ends, for unpaid rent, damage to the property or for other recoverable amounts (as specified in the policy), the insurance company can make a pay out to the landlord. Many policies contain a (subrogation) clause, which allows the insurer to pursue the (former) tenant to recoup any money it pays out to the landlord.

Any money paid out by the tenant is usually less than required for a tenancy deposit, however, none of the money paid by the tenant is returnable at the end of the tenancy.

It is probable that any payment made by an assured shorthold tenant towards a 'smart deposit' will fall outside the statutory tenancy deposit protection regime, because a tenancy deposit is defined as money ‘held as security’[2]. It is possible that this interpretation may be challenged in the courts.


A premium is a payment for a tenancy, that is not rent. In the past premiums were often known as 'key money. Today, they are most commonly payments for long leases.

Tenancies protected by Rent Act 1977

Very few new or renewed tenancies will be governed by the Rent Act 1977; however, for those that are, there are sections in the Rent Act 1977 governing the use of premiums. The Act makes it an offence for any person to require a premium or to receive an unsolicited premium.[3] The Act also makes it an offence for any person to require the payment of a premium as a condition of the assignment of a protected tenancy.[4] There are very limited circumstances in which premiums for Rent Act tenancies are lawful, including where there are alterations to the property and long tenancies.

Tenancies protected by Housing Act 1988

Landlords are able to charge prospective tenants premiums because they were made lawful for assured and assured shorthold tenants by the Housing Act 1988. The definition of a premium in the Housing Act 1988 is:[5]

  • any fine or other like sum
  • any other pecuniary consideration in addition to rent
  • any sum paid by way of deposit, other than one which does not exceed one-sixth of the annual rent payable under the tenancy immediately after the grant or renewal in question

If a periodic assured or assured shorthold tenant is charged a premium by the landlord, they will be able to assign the tenancy and sublet the whole or part of the accommodation. For those tenants who did not pay a premium, there is a prohibition on assignment and subletting without the consent of the landlord.

Housing benefit – help with rent

Housing benefit is a means-tested state benefit that enables people who are liable for rent payments to receive money to pay for them. Anyone who pays rent is eligible to apply, irrespective of the type of tenancy they have.

Housing benefit is administered by local authorities. Each local authority has a duty to make payment on a claim once all the relevant information has been received, within fourteen days or as soon as possible after that.[6] They also have a duty to make a first payment of housing benefit if they have failed to assess a claim within 14 days.[7] Some local authorities are reluctant to make these 'payments on account' but private tenants have a right to some housing benefit and those faced with harassment from their landlords should seek advice to enforce that right.

Help with rent in advance

Much of the discretionary social fund was abolished on 1 April 2013.[8] Community care grants and crisis loans are no longer available to new applicants after that date and have been replaced by a system of locally administered assistance, budgeting loans and budgeting advances.

Locally administered assistance

Each local authority devises its own scheme for helping meet hardship that cannot be met from regular income. Applications for assistance are made to the local authority. Government funding is provided to local authorities for these schemes, however there is no statutory requirement on a local authority to provide a scheme for locally administered assistance. If they do have such a scheme it is for the local authority to determine who to help and how and when to help them.

Information on local welfare assistance schemes can be found using the Child Poverty Action Group online postcode search tool.

Budgeting loans and budgeting advances

A budgeting loan is an interest-free loan to help benefit-claimants spread the cost of items that they cannot afford on their current income. The Department for Work and Pensions' (DWP) Budgeting Loan Guide contains directions and guidance concerning eligibility for budgeting loans.[9] A claimant must have been on income support, income-based jobseeker's allowance, pension credit or income-related employment and support allowance for at least 26 weeks to qualify. Breaks of 28 days or less in the 26-week period will be ignored.

A claimant who has been in receipt of universal credit for 26 weeks will also qualify for a budgeting loan as long as, at the date of determining eligibility, they are receiving state pension credit.[10] Other universal credit claimants may claim a budgeting advance – ie an advance payment of universal credit.

Loans and advances are repaid by deductions from the claimant's benefit.

Budgeting loans can be awarded for expenses under a number of defined categories, which include:[11]

  • rent in advance and/or removal expenses for fresh accommodation, and
  • furniture and household equipment.

Applications are made using claim form SF500.

Rent deposit/guarantee schemes – help with deposits

Neither housing benefit nor the social fund will provide money for deposits, but there are rent deposit/guarantee schemes in some areas.

These schemes operate according to different models. Some will pay a deposit in cash to the landlord. Others may provide a 'bond' to the landlord, which means that the scheme will then recompense the landlord, up to an agreed limit, in the event of the landlord suffering loss due to property damage or non-payment of rent. When a local authority is involved, the scheme may ensure that housing benefit claims are fast tracked. Some schemes will have a list of approved landlords who can offer accommodation. Schemes will have different eligibility criteria, for example some will have age restrictions and others may only accept people who are on benefits or low income.

Local authorities should be able to provide information about deposit schemes in their area.

Coronavirus guidance

Debt charity Step Change has published guidance on debt and coronavirus that outlines what assistance may be available for people unable to meet their financial obligations, including paying their rent or mortgage, because of the coronavirus.

[1] paras 6.19 - 6.28 Guidance for lettings professionals on consumer protection law CMA31, Competition and Markets Authority, June 2014.

[2] s.212(8) Housing Act 2004.

[3] s.119 Rent Act 1977.

[4] s.120 Rent Act 1977.

[5] s.15(4) Housing Act 1988.

[6] reg 91(3) Housing Benefit Regulations 2006 SI 2006/213.

[7] reg 93 Housing Benefit Regulations 2006 SI 2006/213.

[8] s.70 Welfare Reform Act 2012; Welfare Reform Act 2012 (Commencement No.6 and Savings Provisions) Order 2012 SI 2012/3090.

[9] Budgeting Loan Guide, DWP, May 2013.

[10] Direction 8 Budgeting Loan Directions (set out in the Budgeting Loans Guide, DWP, May 2013) as amended by Social Fund (Budgeting Loan) Amendment Direction 2017.

[11] Direction 2 Budgeting Loan Directions (set out in the Budgeting Loans Guide, DWP, May 2013).

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