Paying a deposit
You may be asked to pay a deposit for many products and services such as ordering something from a shop, getting some building work done, booking a hotel room or when hiring a DIY tool or other equipment.
What the law says
When you agree to pay a deposit, it becomes part of a legal contract. Such contracts give rights to and place duties on you and the supplier.
Paying a deposit in a shop
A trader will sometimes ask you for a deposit if they are ordering or reserving an item for you. Always get a receipt for a deposit. The amount you pay should be deducted from the item’s price.
If you change your mind, the shop can legally keep your deposit. For a reserved item, they may also argue that they could have sold the item if it had not been reserved for you. If they do, they may insist that you keep your promise and buy it or else compensate them for their loss of profit.
Paying a deposit to a builder
Builders sometimes ask for a deposit to pay for the materials to start the agreed job. If this happens after you agreed the contract:
- ask to see the invoice from the builder's supplier
- pay the amount invoiced and insist on a receipt
- get a receipt for your deposit or payment
Most suppliers give 'start up' credit to reputable builders. Be suspicious if the builder asks for a deposit for materials before you have agreed to give him the job. If they haven’t got credit, they might have a bad reputation.
You should not pay a deposit to someone you know nothing about. If you do, that could be the last you will see of your deposit and the ‘builder'.
Paying a deposit for a hotel booking
If you pay a deposit when booking a hotel room and then cancel or don't turn up, the hotel will probably keep your deposit. If you tell the hotel that you are cancelling, it must try to re-let your room. But if it can't, it may claim loss of profit from you. You should check the hotel’s cancellation policy before making a booking.
Paying a deposit for tool or equipment hire
If you hire a tool or equipment, you might pay a deposit on top of the hire cost. You will get your deposit back if you return the equipment undamaged. The hirer cannot keep your deposit for wear and tear damage.
You may have to pay a deposit if you want to buy a tool or piece of equipment. If a trader accepts your deposit but fails to give you the goods and you are unable to complete the sale, you should get your deposit back. In this situation you may also be able to claim compensation from the trader if, as a result of their failure to provide you with goods you had agreed to buy, you have to spend more to get the goods elsewhere.
Paying a deposit to a landlord
If you pay a deposit to a private landlord for your rented accommodation, you should get your deposit back at the end of your tenancy as long as you have looked after the property and paid your rent.
Read about the Tenancy Deposit Scheme and how to get your deposit back.
If you have a complaint about your deposit
Try to resolve your complaint with the deposit holder. If your dispute is with a builder who is a member of a trade association, complain to the trade association. Some associations repay deposits paid to member builders who have ceased trading.