Holding Deposit

Full Definition

A holding deposit (also called a reservation deposit) is a sum paid by a prospective tenant to a landlord in exchange for the landlord's promise to hold the unit off the market for a defined period. It is distinct from a security deposit in that it is paid before any lease is signed. Refundability rules vary significantly: if the landlord rejects the application or withdraws the unit, most courts require a full refund. If the prospective tenant backs out without cause, the landlord may typically retain all or part of the holding deposit to compensate for lost marketing time. Many landlords convert the holding deposit into part of the security deposit once the lease is signed. Some states require landlords to apply holding deposits toward the first month's rent or security deposit rather than treating them as forfeitable fees. Tenants should always get a written receipt that specifies the conditions under which the deposit is refundable.