A Guide to Holiday Let Security Deposits

The question of whether or not to ask your guests for holiday let security deposits is commonly debated.

A large number of property owners firmly believe in taking deposits and ask for around a 20% prepayment.

Similarly, many owners including some of those who list their properties with us at Manor Cottages, don’t require a security deposit.

As a desirable location, the Cotswolds is peppered with luxury properties. Read our guide to the pros and cons of charging a holiday let security deposit on your property.

Holiday Let Security Deposits Pros

A good place to start is by understanding the pros and cons of taking a security deposit. Look from the perspective of both the holiday home guests and the owner.

Pros

• The owner has the knowledge that they have cash under their control to cover the cost of any loss or damage
• The owner may feel that guests will be more careful in their home, if there is a risk that they could lose some of their deposit.

Holiday Let Security Deposits Cons

Cons

• Many guests will simply not make a booking if a security deposit is required, due to their fear of potential exploitation
• Guests who have paid a security deposit may not fully enjoy their stay at the holiday cottage, due to a feeling of “walking on egg shells”
• This could restrict repeat bookings and referrals from these guests
• There is additional administration time for both you and your guests.

When to claim

In our experience, damage or breakages incurred during a holiday let can typically be classified as regular, occasional or rare.

For example:

Are you guests aware that you have expensive crystal glasses or luxury wallpaper?

Withholding money from a security deposit for “minor” mishaps can appear negative.

There is a stronger case for withholding cash from security deposits for the more occasional and more expensive damage. For example, permanent stains on bed linen, or where significant extra cleaning is required.

Is it worth the potential loss of goodwill and negative property reviews to withhold £25 from a guest’s deposit for additional cleaning costs?

Even in the rare event where there is an expensive breakage, it may not always be clear cut as to which guests are at fault.

Holiday Let Insurance

Genuine, “malicious” damage is rare and the costs of wear and tear should be factored into the rental rates charged for luxury properties.

Furthermore, it’s recommended to take out additional insurance to protect against expensive damage from rare events.

In theory, deposits give owners peace of mind against unwanted financial costs. However, they can deter many potential guests.

Finally, withholding cash from deposits can lead to significant disenchantment.

This is especially true if guests feel that they have been unfairly treated by the owner. As a result, this can lead to negative publicity and lost revenue.

Where an owner’s objective is to maximise their profit, they should avoid security deposits.

Ultimately, the benefits of higher income and guest goodwill levels will outweigh the limited financial protection that withholding cash from guests can provide.

Contact Us

Here at Manor Cottages we would love to help you on your holiday letting journey.

Contact us today on 01451 600844 or alternatively, fill in our Let Your Cottage form.  Our expert team will happily give you a call.

Please Note: The information contained in this article was accurate at the time of writing, based on our research. Rules, criteria and regulations change all the time, so please contact our prospective new owner team if you’d like to hear how. Nothing in this article constitutes the giving of financial, tax or legal advice to you; please consult your own professional advisor (accountant, lawyer etc). in this regard. If we have referred within the article to a third-party provider of unregulated holiday let mortgages, this is due to the fact that such mortgages aren’t currently regulated by the FCA. 

As a helpful reminder, your home may be repossessed if you do not keep up repayments on a mortgage, so again anything you decide to do in this particular area this is one on which you should take your own professional advice on too, as we aren’t providing and can’t provide you with this.