Everything landlords need to know about deposit disputes
Deposits are a core element of any tenancy that keeps both the tenant and landlord satisfied and secured during the tenancy.
However, when things go awry, disputes may occur. Landlords and tenants sometimes disagree about deposits at the end of a tenancy and in many cases these disagreements can be resolved by having a detailed and comprehensive inventory in place.
While deposit disputes are relatively rare, they do still happen and can prove costly. So, landlords need to understand why they happen and how they can be prevented.
Providing that it is stipulated in the tenancy agreement, which should have been looked over and signed by both the tenant and the landlord, a deposit can be withheld to cover any loss incurred by the landlord that is caused by the tenant, such as non-payment of rent or damage to the property.
Under the terms of the Housing Act 2004, it has been a legal requirement since April 6 2007, for landlords who rent a property on an assured shorthold tenancy to protect any deposit taken within 30 days of receipt.
Additionally, the tenant must also be served with a copy of the deposit scheme leaflet along with any other prescribed information.
At the start of a tenancy, landlords should ensure that all deposits relating to assured shorthold tenancies are protected within a government-approved tenancy deposit scheme – namely the Deposit Protection Scheme, mydeposits and the Tenancy Deposit Scheme.
In the scenario where the deposit has been paid by a third party, they must then also be provided with the statutory notice and associated documents.
But the real question is, what should landlords know about deposit disputes, and how curated inventories and training can reduce the number of instances these occur.
Figures from the Deposit Protection Scheme (DPS) show that, following disputes, 18.5% of tenant deposits are returned in full to the landlord, 54.7% are split between both landlord and tenant, and 26.8% are refunded in full to the tenants.
There is a clear difference between damage and fair wear and tear, which needs to be fully understood.
The criteria for deposit deduction must be properly understood before raising any disputes, with deductions not possible for fair wear and tear.
This seeks to prevent the landlord from ending up in a better position than they would otherwise have been.
The role of an inventory
At the beginning of the tenancy, your job as the landlord is not only to provide an adequate home for your tenant, but this is after all your investment, so to protect yourself and your property financially, it’s wise to turn to an inventory.
This document provides a detailed description of the condition of the property when the tenancy started, including everything from the state of the carpets to the position of the furniture.
Photos are usually also included, which provides additional evidence for your inventory.
During the course of the tenancy, you should also consider carrying out systematic inspection of your property to update the inventory as necessary. Your tenant should also receive a copy of this inventory so they can check off items as they’re returned at the end of the tenancy.
Deposit dispute resolution and prevention
Thankfully, tenant deposit disputes are relatively rare, but in the event that they do occur, a landlord should first try and resolve any disagreement with their tenant amicably.
Give your tenant a breakdown of the amounts and items with the use of your inventory along with the tenancy agreement and show why and what any withhold money is for, whether that be for owed rent or damage to the property.
This is why it is absolutely vital that you prepare a quality inventory with a precise schedule of the condition of the property since this will substantiate any damage or missing items in the rental property, and how they go beyond what should be considered the reasonable wear and tear of the home.
Inventories provide supporting evidence that clarifies what does and does not count as fair wear and tear. Nonetheless, it is essential that before entering into a tenancy agreement, all parties have a firm understanding of this issue.”
As a landlord, you want to protect your investments and establish smooth transitions from one tenant to the next. Here at AIIC, we are dedicated to promoting the highest possible standards of accuracy and reliability in the inventory process and have been endorsing high levels of professionalism in the inventory business since 1996.
It is our mission to ensure proper information and training is provided and our bank of highly skilled members will provide the best possible service. For more information, please contact us or search for your local AIIC member clerk now.
You can also download a copy of our Code of Practice and Guidelines for Professional Practice guide here.
Published on 14/10/2022