Deposit disputes are a landlord and tenant’s worst nightmare. They can be a lengthy process that generally leaves a sour taste in everyone’s mouth. Fortunately, it’s not something that happens often. Out of the nine-million-plus rented homes, less than 1% of tenancies end in a dispute over deposits. Even though they’re a rarity, you should still be prepared and understand where you stand with tenancy deposit disputes. Here, we’ve got the answers to your questions about deposits and everything you need to know about handling a potential dispute with your tenant.
What can landlords claim from a deposit?
- Unpaid rent
- Damage to the property
- Cleaning costs
- Missing items
- Changes to the property and redecoration
- Utility bills
- Pet damage
You can use the deposit to cover unpaid rental arrears if the tenant leaves still owing you a portion of the rent.
Damage to the property
Like-for-like charges can be made against damages in the property caused by the tenant. Eg, if there is damage to a three-year-old sofa, you can only deduct the current value of that sofa from the deposit.
This is by far the most common reason for withholding a deposit, and you can claim cleaning costs if the tenant fails to clean the property to the same standard as when they moved in.
You can deduct the cost from the deposit for any items missing from the check-in inventory.
Changes to the property and redecoration
Tenants aren’t allowed to make significant changes to the property without your consent. If they do, you can charge for the cost of restoring the changes. The same goes for redecorating.
If a tenant has unsettled utility bills, you can use the deposit to deduct the amount. However, the utility company is likely to go after the renter directly if bills are in their name.
You can deduct the deposit for any neglected outside space where the tenant hasn't looked after it properly.
Damage caused by pets
Issues caused by pets, such as property damage or pest infestations, are deductible from a tenant’s deposit.
What can’t landlords take from the deposit?
- General wear and tear
- Unattended repairs
- Scuff marks on walls
- Preparation for next tenancy
- Property improvements
General wear and tear
There’s an expectation that any property will have some wear and tear, especially as a result of longer tenancies. You can’t charge tenants for things like worn carpets and furniture that haven’t stood the test of time.
If you didn’t fix any repairs reported during the tenancy, you can’t then go and charge the tenant for the work once they’ve moved out. For example, if the tenant reported a broken tap and you didn’t resolve the issue, you can’t deduct the cost from their deposit.
Minor marks on the walls, floors and around the property are to be expected. You can’t deduct money from the tenant’s deposit for repainting these scuffs.
Preparation for next tenancy
You can’t charge tenants for actions relating to the next tenancy, such as re-let fees.
Any charges for damages must be like-for-like. You can’t deduct from the tenant’s deposit for enhancements to the condition of the property over the previous let.
What happens if a tenant raises a dispute?
While you might believe the tenant has done something to warrant a deduction from their tenancy, they may disagree. This could result in a tenancy deposit dispute, with an independent adjudicator deciding on where the blame lies.
How does that work? All landlords are required to register the deposit in a government-backed Tenancy Deposit Scheme (TDS). These include:
These schemes are designed to protect the deposit and ensure tenants receive the total amount back if they adhere to the terms of their tenancy agreement while maintaining the property. However, they are unbiased and step in to resolve landlord and tenant deposit disputes.
There are two primary options under the government-backed schemes:
With the custodial scheme, the landlord or letting agent isn’t required to pay a fee for the deposit protection as the TDS looks after it. The TDS then releases the deposit at the end of the tenancy.
An insured scheme sees the landlord or letting agent hold the deposit throughout the duration of the tenancy, paying a fee to the TDS to regulate the deposit. Each tenancy fee is around £25 but can vary depending on the scheme.
The deposit dispute process
Once a tenant raises a dispute, the TDS will look over the case and decide, either ruling in the tenant's favour or siding with the landlord. The dispute service is free for both landlords and tenants. You will both be asked to provide evidence supporting your claim, with the decision made being final.
Does the landlord or managing agent need to agree to a claim?
The landlord or managing agent and the tenant need to agree to a dispute resolution process. However, refusing to submit the claim to adjudication does not mean that you will receive the funds you are claiming from the deposit. If any party refuses to take part, the dispute is moved to the courts, which is usually an expensive and lengthy ordeal.
In most cases, it’s best to try and resolve any disputes before it goes to a dispute resolution service. Often, communication between yourself and the tenant can result in an outcome that everyone is happy with and remove the need for an independent adjudicator to intervene. If, however, there is continuing disagreement between yourself and the tenant, a dispute resolution process can find a resolution much faster than if the case makes its way to court.
What evidence do landlords need to support a claim?
Both you and the tenant typically have 14 days to provide evidence after a claim is raised. Evidence is key to ensuring the result goes your way, and you may need to show the following:
Photographs can help show evidence of things like serious damage. Ensure that they are dated and time-stamped to confirm the condition of the property before and after the tenancy.
The check-in inventory is perhaps the single most crucial factor in a tenancy dispute as it showcases the condition of the property before the tenant moved in and details everything included in the home. It's often used for cross-referencing during tenancy deposit disputes.
The tenancy agreement states the terms and conditions of the lease and is signed by both the landlord and tenant.
Email and text correspondence
Any email and text message correspondence between the landlord and tenant may be used as evidence to support a claim. Eg, regarding repairs and maintenance.
You may be required to show invoices for repairs made as a result of tenant neglect. Ensure that you keep all original receipts.
What are the most common causes of a tenancy deposit dispute?
Cleaning is the most common tenancy dispute. When a tenant moves into the property, the landlord is responsible for professionally cleaning it. When they leave, however, it is the renter’s responsibility to ensure the property has been professionally cleaned.
Many tenants are happy for the landlord to deduct professional cleaning costs if they don't have the time to do it themselves. Yet, some may feel they have cleaned the property to a high standard while the landlord disagrees.
This can be somewhat of a grey area. After all, how clean is clean? There shouldn't be any real issues if tenants can prove they've used a professional cleaning service. Ultimately, it's up to you as the landlord to decide what constitutes a clean apartment, using the check-in inventory as a guide.
Because the cleaning fee is relatively low compared to the rest of the deposit, it's best to open a dialogue with the tenant. It's rare for a cleaning dispute to reach the independent adjudicator stage, and communication with your tenant about how the property is cleaned is the best way to come to a conclusion that works for everyone involved.
Summary: safeguarding yourself against disputes
Tenancy deposit disputes are rare, but that doesn't mean they can't happen. That's why it's essential to safeguard yourself against any potential disputes by adhering to the tenancy agreement and getting a check-in and check-out inventory report before the tenant moves in and when they vacate the property. Doing so provides you with evidence of the home's condition before the tenancy commences and after they leave, giving you the necessary ammunition to prove your claim should you find yourself in a tenancy deposit dispute.
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