Are Holding Deposits Refundable In New Zealand? Commercial Contracts & Leases

You’ve found the right premises, you’ve negotiated (most of) the key points, and the landlord or agent asks for a “holding deposit” to take the property off the market while the paperwork gets finalised.

If you’re a small business owner, this can feel like the last step before you get the keys. But it also raises a very fair question: are holding deposits refundable in New Zealand?

The frustrating (but honest) answer is: it depends on what you agreed, how the deposit was taken, and why the deal didn’t proceed. The good news is that once you understand the common deposit types and what makes them enforceable, you can usually avoid nasty surprises.

Important: This article is general information only and doesn’t take into account your specific situation. Holding deposit disputes are very fact-specific, so it’s worth getting advice on the documents and communications in your particular deal.

Below, we’ll break down what a holding deposit is, when it might be refundable, how this plays out in commercial leases and business contracts, and what you can do to protect your business from day one.

What Is A Holding Deposit (And How Is It Different From Other Deposits)?

A holding deposit is usually a payment made before a final contract or lease is signed, with the idea that the other party (often a landlord) will “hold” something for you while you complete due diligence, finance, legal review, or documentation.

In small business life, holding deposits commonly come up in:

• Commercial leases (to reserve premises while a lease is negotiated)
• Business purchases (to show commitment while due diligence is underway)
• Supply or service deals (to secure stock, manufacturing slots, or a booking date)

It’s important not to mix up a holding deposit with other common payments, because refundability often turns on the category of payment and what the contract says.

Common Deposit Types You’ll See In Commercial Deals

• Holding deposit: paid to “reserve” the opportunity while details are finalised. Often taken before final documents are signed.
• Security deposit / bond: typically paid under an entered lease to secure performance (for example, to cover damage or unpaid rent). This is different to a holding deposit.
• Part-payment: simply a payment towards the price (for example, the first instalment of a purchase price).
• Deposit as “earnest money”: a payment showing commitment, often used in sale and purchase contexts, and sometimes intended to be forfeited if the payer defaults.
• “Non-refundable deposit”: a label people use, but whether it truly is non-refundable depends on the agreement and circumstances (more on that below).

If your holding deposit is being collected while you’re negotiating a lease, it’s worth getting the broader paperwork right too, including the Heads of Agreement or early term sheet stage.

Is A Holding Deposit Refundable In New Zealand?

There’s no single rule that makes every holding deposit refundable (or non-refundable) in New Zealand. Instead, the outcome usually depends on:

• What was agreed in writing (even a short email trail can matter)
• Whether the deposit is tied to specific conditions (for example, “subject to landlord acceptance” or “subject to finance”)
• Whether the other party actually “held” the opportunity and what they gave up in doing so
• Whether the payer “defaulted” (e.g. changed their mind) or whether the deal fell over for other reasons
• Whether the deposit amount is reasonable in the circumstances

In plain terms, a holding deposit is more likely to be refundable when it’s genuinely just a placeholder while both sides are still deciding, and there’s no clear agreement that it can be kept.

On the other hand, a holding deposit is less likely to be refundable when you’ve clearly agreed (in advance) that the deposit may be kept if you don’t proceed, and that term is clear and workable in the circumstances.

Why Holding Deposit Refunds Can Be Tricky In Practice

Holding deposits often live in a messy “in-between” zone:

• You haven’t signed the final contract yet.
• You may still be negotiating key terms.
• The other party might still be considering other candidates.

That’s why it’s crucial that the holding deposit arrangement is documented properly. Otherwise, both sides may assume different things (for example, you assume it’s refundable if the lease doesn’t proceed; the landlord assumes it’s compensation for time off the market).

Holding Deposits In Commercial Leases: What Small Businesses Should Watch For

Commercial leasing is one of the most common scenarios where business owners ask whether a holding deposit is refundable.

Here’s what typically happens: you agree on some commercial terms (rent, term, outgoings), and the landlord asks for a holding deposit to stop marketing the property while you sort out:

• lease drafting and negotiation
• guarantor or security requirements
• fit-out discussions
• final approvals and signing

The risk is that you pay the holding deposit, then discover something during negotiation or due diligence that makes the lease unattractive (or unworkable), and you want your money back.

Where Refund Disputes Usually Come From

Refund disputes often come down to a few common flashpoints:

• No clear written terms: you paid “to hold it” but nothing says what happens if the lease isn’t signed.
• “Subject to lease” misunderstandings: you thought it was conditional; the landlord thought it was effectively a commitment.
• Timing pressures: you paid to secure the site, but the landlord takes weeks to send the lease documents.
• Change of mind: your business plan changes or funding falls through.

From a business owner’s perspective, the best way to reduce risk is to treat the holding deposit like a mini-contract: it should clearly say what you’re paying for, and when you get it back.

If you’re already in lease negotiations, it’s also smart to have the actual lease reviewed early, not at the last minute. A Commercial Lease Review can help you spot clauses that might make the premises too risky or expensive (like outgoings, make-good obligations, and personal guarantees) before you’re “locked in” by momentum.

When Can A Holding Deposit Be Kept (And When Might That Be Unfair)?

Even when a document says a deposit is “non-refundable”, that doesn’t automatically mean it’s untouchable in every scenario.

Commercial arrangements still need to stack up under basic contract law principles, and businesses also need to be careful about misleading conduct and unfair practices.

1) If You Agreed It’s Forfeited When You Walk Away

If you’ve agreed in writing that the holding deposit is forfeited if you don’t proceed (and that agreement is clear), then the other party has a stronger argument for keeping it if you simply change your mind.

However, the amount and context matter. Depending on how the payment is characterised and how the clause is drafted, a court may look closely at whether forfeiting the deposit is proportionate and consistent with the bargain (and, in some cases, whether relief against forfeiture could apply). In other words, calling something a “holding deposit” doesn’t automatically decide the outcome.

2) If The Other Side Didn’t Do What They Promised

If the landlord/supplier/seller didn’t actually “hold” the deal, didn’t progress the documents, or acted inconsistently with the arrangement, you may have a stronger argument that the holding deposit should be refunded.

For example, if you paid a holding deposit on the understanding the property would be taken off the market, but it stayed advertised and was offered to other tenants, you’d understandably question what you paid for.

3) If You Were Misled About What The Deposit Was For

Small business contracts still need to be negotiated and performed honestly. If one party made misleading statements about the purpose or refundability of the deposit, that can lead to legal consequences.

In New Zealand, the Fair Trading Act 1986 is a key law in this space. It broadly prohibits misleading or deceptive conduct in trade. So if the deposit was taken in a way that misled you about whether it was refundable, that’s a red flag you should get advice on quickly.

Similarly, if you’re negotiating with another business and you’re providing information about deposits, you need to make sure what you say in emails and marketing materials is accurate and not likely to mislead.

4) If There’s No Signed Agreement (But Money Changed Hands)

This is where disputes get messy. If there’s no signed document setting out what happens to the holding deposit, the parties may argue about:

• what was agreed verbally
• what was implied by conduct
• whether the money was a deposit, part-payment, or something else

Depending on the facts, you may also see arguments based on restitution/unjust enrichment (i.e. whether it’s fair for one party to keep money when the underlying deal never proceeded).

If you’re paying any significant holding deposit, it’s worth ensuring there is at least a short written agreement (even a letter or email) setting out refund rules.

How To Set Up Holding Deposits Properly (So You Avoid Disputes)

If you want to avoid a holding deposit refund argument later, the best approach is to get clarity before money is transferred.

Here are practical clauses and questions to cover.

What Should The Holding Deposit Agreement Include?

• What the deposit is for: Is it to hold the premises, pause advertising, reserve manufacturing capacity, or show commitment?
• How long it holds the deal for: For example, 5 business days, 10 business days, or until a specific date.
• What the next step is: e.g. lease execution, signing an agreement for lease, completing due diligence, finance approval.
• When it’s refundable: list clear triggers (for example, if the landlord doesn’t approve you, if lease terms can’t be agreed by a deadline, or if due diligence reveals an issue).
• When it’s forfeited: for example, if you withdraw without reason after a certain stage.
• Where the money is held: is it in trust, or paid directly to the other party?
• Whether it’s applied later: if the deal proceeds, will it be credited toward rent, bond, or purchase price?

Be Clear About “Subject To” Conditions

Many small businesses assume a holding deposit is refundable because the deal is “subject to” something (like finance or landlord approval).

The catch is: unless “subject to” conditions are clearly written, they may not protect you the way you expect.

In leasing, you may see these issues worked through in early-stage documents and negotiations. If you’re at that stage, it’s often helpful to sort out the structure of the lease documentation (and who is responsible for what) before you pay anything significant, including whether you need a Commercial Tenancy Agreement drafted or reviewed.

Use The Right Document For The Stage You’re At

A holding deposit arrangement is sometimes used when what you really need is a more formal “pre-contract” document, such as:

• a heads of agreement (setting commercial terms and process)
• an agreement for lease (committing to enter the lease once conditions are met)
• a short-form contract setting out deposit and exclusivity terms

If you’re negotiating a bigger arrangement (or the deposit is significant), it can also be worth having the overarching Contract Review done before you pay, not after.

Key Takeaways For Small Businesses

• A holding deposit is not automatically refundable in New Zealand; whether it’s refundable depends on the written terms, the circumstances, and how the deal fell over.
• Holding deposits commonly arise in commercial leases, where the risk is paying money before the lease is finalised and then discovering terms you can’t accept.
• A label like “non-refundable” isn’t the end of the story; enforceability can depend on how clearly the arrangement is documented, how the payment is characterised, and whether the outcome is workable on the facts.
• The Fair Trading Act 1986 can be relevant if a holding deposit was taken using misleading statements or conduct in trade.
• The best protection is to document the holding deposit arrangement properly, including timelines, conditions, and exactly when the deposit must be refunded or can be kept.
• If the deposit is significant (or the deal is time-sensitive), getting legal advice early can save you time, cost, and leverage in negotiations.

If you’d like help reviewing a lease or setting up clear deposit terms in your commercial contract, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.