Security deposits for holiday lets: what consumer law means for hosts

Is a holiday let deposit protected by a scheme?

GOV.UK's page on deposit protection schemes is about landlords who rent out property on an assured shorthold tenancy that started after 6 April 2007. It does not mention holiday lets.

A holiday let is a different arrangement. In England and Wales, the Housing Act 1988 lists "a tenancy the purpose of which is to confer on the tenant the right to occupy the dwelling-house for a holiday" among the tenancies that cannot be assured tenancies. So the tenancy deposit scheme page is not written for a genuine holiday stay. We have not found a government page that sets up a holiday let deposit scheme, and rules in Scotland and Northern Ireland differ, so check yours.

Do not mistake that for a free hand. You still hold the guest's money, and you need to be able to explain every penny you keep.

What consumer law says about deposits and charges

The CMA's guidance on writing a fair contract for customers, published on GOV.UK, says it is illegal to use unfair contract terms. It says a business cannot keep prepayments, deposits included, if the contract does not go ahead, and should refund prepayments if the customer is not at fault. It also says any charge for a breach of contract should be "proportionate and appropriate".

The Consumer Rights Act 2015, Schedule 2, lists terms that may be regarded as unfair. They include a term that requires a consumer who fails to meet their obligations to pay "a disproportionately high sum in compensation", and one that lets the trader keep sums the consumer paid where the consumer decides not to go ahead without matching compensation if the trader cancels.

Whether a guest counts as a consumer in your case depends on how you let. If you let as a business, assume these rules are relevant and write your terms to meet them. Take advice if you are unsure.

Writing deposit terms that are easy to defend

Your own terms are where a deposit dispute is won or lost. The CMA advises everyday words and no ambiguity. For a deposit clause, that means covering the following.

• The amount and when it is taken, and whether it is a held deposit or a pre-authorisation on a card.
• What it can be used for: damage, missing items, extra cleaning beyond normal, and any other charge you list.
• How you will assess a deduction: the inventory, photos and receipts you will use.
• When and how you will tell the guest about any deduction, and how long refunds take.
• What happens to the deposit if you cancel, which should be a full refund where the guest is not at fault.
• That deductions are for real costs, not a standard penalty, so they stay proportionate.

The evidence behind a deduction

A deduction is much easier to explain when you can show what the property looked like at check-in. Take dated photos of each room, keep a signed inventory, and note anything already worn or damaged. At check-out, compare, photograph anything new, and get a quote or receipt before you finalise the amount.

Our guide to security deposits and damage terms covers the wording of the clause. The free record below is for the step after a stay, when you decide what to keep and show the guest why.

If you take deposits off the booking platform

Platforms have their own rules about payments, damage claims and what a host may ask guests to pay outside the platform. Read your platform's host terms before you take a separate deposit, and do not assume your own terms override them.

What a damage deposit deduction record should show

A preview of our free Damage Deposit Deduction Record. The complete, print-ready version is sent to you by email.

Frequently asked questions

Sources

• Writing a fair contract for customers, Competition and Markets Authority on GOV.UK
• Consumer Rights Act 2015, Schedule 2: Consumer contracts that may or may not be regarded as unfair, legislation.gov.uk
• Deposit protection schemes and landlords, GOV.UK
• Housing Act 1988, Schedule 1: Tenancies which cannot be assured tenancies, legislation.gov.uk