What happens when a tenant exaggerates their income to secure a rental property? Can landlords fairly retain the holding deposit in such cases?

The Tenant Fees Act 2019 was introduced by the UK government as part of a wider reform to make the private rental sector fairer, more transparent, and more affordable. For many years, tenants in England faced a range of charges not just when applying for a property, but also during and even after their tenancy — including renewal fees, check-out fees, and inflated charges for minor damages. These costs were often unclear, inconsistently applied, and placed a disproportionate financial burden on renters.

The Act was designed to put an end to these practices by banning most fees and capping others, helping to level the playing field between landlords, agents, and tenants. Its aim is to ensure that tenants have clarity over what they’ll pay and are not subjected to hidden or excessive costs throughout their tenancy.

Among its key provisions is the regulation of holding deposits, which are paid by prospective tenants to reserve a property while referencing and checks are carried out.

Consider a scenario where a tenant, eager to secure a room in a desirable area, exaggerates their income to appear more attractive to landlords. Initially stating they earn £35,000 annually, checks later reveal their true income to be just £16,000. Such significant discrepancies disrupt the landlord’s decision-making process and disadvantage honest applicants.

Under the Tenant Fees Act 2019, this is a textbook example of “providing false or misleading information,” which is a valid ground for the landlord to retain the holding deposit.

Why is this fair and reasonable?

The Cost of Taking a Property Off the Market

When a property is reserved for a prospective tenant, the landlord or letting agent typically halts all marketing and cancels upcoming viewings. This is done in good faith — based on the assumption that the applicant is suitable and has been honest about their circumstances.

Marketing a property and conducting viewings is not a small task. It involves:

• Coordinating with current occupants for access
• Taking professional photographs
• Writing property listings
• Responding to countless enquiries
• Vetting viewers before booking appointments
• Physically showing people around the property — often on evenings and weekends

All of this takes hours of administrative and logistical work, not to mention the opportunity cost of turning away other potential tenants who might have been genuine and ready to proceed.

In the case where an applicant lies about their income or omits crucial information, the entire process has to be restarted from scratch, causing delays, lost time, and financial impact for the landlord.

Unfair to Other Tenants

Another key issue is the impact on other potential tenants. In competitive rental markets, properties — especially well-priced, good-quality rooms — get snapped up quickly. When one individual falsely claims to meet the affordability criteria and reserves a property, others who might have been perfectly suitable lose the chance to apply. By the time it becomes clear the first applicant was not eligible, those genuine prospects may have already found alternative accommodation.

This not only hurts the landlord — it’s unfair to other tenants who are honest about their circumstances and play by the rules.

Terms of the Holding Deposit

When a prospective tenant agrees to pay a holding deposit, this amount — capped at one week’s rent — is paid to reserve the property while references and checks are carried out. The terms of the holding deposit should always be made clear in writing, and should explain:

• The deadline for agreement (usually 15 calendar days unless agreed otherwise)
• What documents or information the tenant must provide (e.g. proof of income, ID, right to rent)
• The conditions under which the holding deposit will either be returned or retained
  
• If the tenancy goes ahead, the holding deposit is usually deducted from the first month’s rent or tenancy deposit. If the tenancy does not proceed, the outcome depends on the reason why.

To fairly retain a holding deposit, landlords or agents must clearly document conditions upfront. Providing prospective tenants with a straightforward, written explanation prevents misunderstandings and ensures compliance with the Act.

When Can a Holding Deposit Be Retained?

Under the Tenant Fees Act 2019, landlords or agents are permitted to retain the holding deposit if:

• The tenant withdraws from the application
• The tenant fails a right to rent check
• The tenant fails to take reasonable steps to enter into the agreement
• The tenant provides false or misleading information

Section 5 of the Tenant Fees Act 2019 explicitly allows landlords to retain holding deposits if false or misleading information directly influences the landlord’s decision to rent. If a tenant gives inaccurate or misleading information that affects the landlord’s decision — such as overstating income, failing to disclose adverse credit history, or giving false employment details — the landlord is legally entitled to retain the holding deposit. This applies even if the tenancy never starts.

The landlord must be able to show that the information provided was relied upon, and that the discrepancy affected the decision to offer the property.

Conclusion

Retaining a holding deposit isn’t punitive—it’s a reasonable measure designed to compensate landlords for genuine costs resulting from tenants’ misleading statements. Ultimately, honesty from both tenants and landlords creates a more equitable renting environment for everyone.

Landlords and agents have a duty to protect their properties, their businesses, and future tenants. If a tenant misleads you on such a fundamental point as income, the law supports your right to retain the holding fee — and rightly so.