Deposit retention/return question

[Landylord]

I am a new landlord and I have a query in relation to a deposit that was paid to me.

Here are the details.

I rented out the house for the university term to a group of students in September 2009. Towards the end of the term I contacted them to see if they wanted to keep the house for the following term or if they did not then I would advertise it in the university student rentals section and have the house rented by other tenants for the new term.

The original tenants said they would take the rooms for the next academic year and that i was not to advertise it in the university.

I said that I would need a deposit to secure the property for the new term. We agreed that the deposit taken at the initial rental would act as the new deposit for the new term to secure the house.

They rang up yesterday and said that they now dont want to take the house for the new term as they have fallen out with one of the guys that was in the house.

Are they entitled to their deposit back despite the fact that the deposit was taken to secure the property for the new term and that I missed out on the opportunity to have the house rented out already by not advertising it on their instructions?

If they are due to back then i want to be fair and return it.

Thanks for anyone who takes time in answering my question.

[Snorkerz]

If the tenants were to try and claim their deposit back through the relevant deposit protection scheme (it IS protected isn't it?), you would only be able to retain funds for missing rent and proven damage.

So no, you can not retain this holding deposit.

As a general rule, holding deposits are only non-returnable if that was agreed when the deposit was paid.

[Meme]

I said that I would need a deposit to secure the property for the new term. We agreed that the deposit taken at the initial rental would act as the new deposit for the new term to secure the house.

They rang up yesterday and said that they now dont want to take the house for the new term as they have fallen out with one of the guys that was in the house.

Are they entitled to their deposit back despite the fact that the deposit was taken to secure the property for the new term and that I missed out on the opportunity to have the house rented out already by not advertising it on their instructions?

Surely there is still plenty of time to advertise the house before the new term?

If they haven't signed any contract for next year I don't see how it could be reasonable or justifiable to keep the deposit.