As a landlord, you are entitled to retain some or all of a tenant’s deposit in certain circumstances. Read our guide to fair deductions to ensure you comply with the rules and avoid legal claims from tenants.
It is important to deal correctly with a deposit, from ensuring it is placed in a tenancy deposit protection scheme to communicating effectively with the tenant at the end of the tenancy. If you are taken to court by the tenant, you run the risk of being penalised over their legal costs, as well as being required to return their deposit or being unable to end the tenancy when you want to.
Understanding Tenancy Deposit Schemes
Tenancy deposit schemes were introduced by the government to protect tenants’ deposits and ensure that they are returned at the end of the tenancy, provided that the tenant has complied with the terms of the agreement and the property is clean and undamaged.
When a landlord receives a tenant’s deposit, they are required to place it in a government-approved tenancy deposit scheme within 30 days. The tenant must be provided with the following information:
- The property address
- How much deposit have they paid
- How the deposit is protected
- The name and contact details of the tenancy deposit protection scheme and the associated dispute resolution scheme
- The landlord’s name and address, or that of any agency they are using
- If a third party has paid the deposit, their name and address
- The circumstances in which the landlord would keep some or all of the deposit
- What the tenant should do if they are unable to contact the landlord at the end of the tenancy
- What to do if a dispute arises over the deposit
There are two different types of tenancy deposit schemes, namely a custodial and an insured scheme.
With a custodial scheme, the deposit is held by the scheme provider.
An insured scheme allows the landlord to retain the deposit in their own bank account, but they must pay a fee to insure the money.
Government-approved tenancy deposit schemes for England and Wales are:
All of the schemes offer the option of a custodial scheme and an insured scheme.
At the end of the tenancy, the landlord must return the deposit to the tenant within 10 days of agreeing on the amount to be returned to the tenant.
A tenant can take the landlord to court over their deposit, especially if it is not protected in an approved tenancy deposit scheme. This can be done at any time during the tenancy.
The court can order the landlord to repay the deposit to the tenant or to pay it into a custodial tenancy deposit scheme within 14 days. The court also has the discretion to order a landlord to repay the tenant up to three times the amount of the original deposit.
In addition, if a landlord fails to protect a tenant’s deposit or to provide the tenant with the above information, they will lose the right to serve a Section 21 ‘no-fault’ eviction notice on the tenant.
What Constitutes Fair Wear and Tear?
Fair wear and tear is normal deterioration that can be reasonably expected from the number of tenants over the period in question.
This can include:
- Minor scuffs to walls, fading of paint, small holes from hooks and minor cracks in plasterwork
- Wear from the regular use of appliances
- Fading of soft furnishings, wearing out of cushions and fabrics, minor dirt on furniture and small, light stains and loose handles to furniture, doors or windows
- Reasonable wear to a carpet or light scratching to a hard floor covering
Factors that are also taken into account when looking at what is reasonable are:
- How many tenants are in occupation, and whether any of them are children
- The length of time they have been at the property
- The condition, age and quality of the items in question
No deductions can be made by landlords for fair wear and tear.
What is Considered Damage?
Damage that goes beyond fair wear and tear, and which a landlord can take into account when calculating how much of the deposit to return, includes:
- Substantial damage to walls, such as badly scratched paintwork or major holes
- Bad staining to carpets, burns or breakages to hard flooring
- Torn or burned furniture
- Broken or damaged appliances, including where that have been neglected or misused
- Damage to fixtures, fittings or utility systems
What Deductions Can a Landlord Make from a Tenant’s Deposit?
A landlord is only permitted to make fair and reasonable deductions from the deposit. The following issues may be allowed:
- Property damage and cleaning costs
- Unpaid rent and other expenses
- Gardening
- Breach of the tenancy agreement, such as leaving the property early
Property Damage and Cleaning Costs
The property should be returned in the same state as it was when the tenant moved in, although, as a landlord, you cannot deduct money from the deposit to cover fair wear and tear. This can be an area of dispute, as a tenant may have a different opinion as to whether their use has damaged the property or is merely general expected wear.
The number of tenants and the length of time they have been in occupation are relevant when looking at this issue. For example, if the tenancy is lengthy and the property is left to a family with children, more wear and tear will be reasonable than for a shorter tenancy to a sole occupant.
Generally speaking, damage such as breakages, holes or damage to a carpet and damage to walls, doors or windows is enough for a landlord to retain money from the deposit to remedy this. The remedial action should be reasonable. It may not be necessary to replace a carpet or redecorate a room, and you will only be able to retain sufficient money to deal with the issue and not improve the property at the tenant’s expense.
If items included in the original inventory are missing from the property, funds can be retained to replace these like-for-like.
The property should be returned as clean as it was at the start of the tenancy, with rubbish in bins or removed from the property if it does not fit into the outside bin.
Landlords are not permitted to charge for professional cleaning automatically; this is only allowed where it is necessary because the property is less clean than it was when the tenant rented it.
Non-Payment of Rent and Expenses
Tenants should pay rent to the end of the tenancy unless you have agreed with them that you will keep the deposit in lieu of the last month’s rent.
The tenant should provide the correct notice by the terms of the tenancy agreement. If they do not, then they will be liable for rent payments as specified. This could be until new tenants move in or the landlord ends the tenancy agreement.
A landlord can usually retain the deposit if a tenant leaves without giving notice. Tenants will remain liable for unpaid rent, costs if rent is over two weeks overdue and unpaid expenses.
You cannot keep money from the deposit to cover unpaid utility bills where the utility company’s agreement is with the tenant, however.
Gardening Costs
The tenant should look after the outside of the property unless alternative provisions are made in the tenancy agreement, such as the landlord providing regular gardening services.
Again, the outside should be returned in the same condition as it was at the start of the tenancy, with grass and hedges cut, the space clean and tidy and outside furniture in reasonable condition, taking into account normal wear and tear.
Breach of the Tenancy Agreement
Leaving without giving notice is a breach of the tenancy agreement, and you may be able to retain enough of the deposit to ensure you are not out of pocket because of this. In certain circumstances, this could mean keeping funds to cover rent up until you install new tenants, but you should take legal advice to ensure you do not exceed your authority.
Deductions can only be made for other breaches of the tenancy agreement if they have cost you money. For example, if pictures were mounted on the walls, you would not be able to retain anything from the deposit unless this has caused damage that you would need to repair.
The Importance of a Detailed Inventory
Drawing up a detailed inventory at the start of a tenancy can help avoid or resolve disputes at the end of the term. It is a clear record of everything at the property and will help if anything is damaged or goes missing during the tenant’s occupation.
It should include detailed descriptions of rooms, including the fixtures, fittings, furniture, smoke alarms and carbon monoxide detectors, and information about their condition.
Photos and videos with date stamps are a good way of recording what is present.
At the start of the tenancy, the tenant should be asked to inspect the property and both the landlord and tenant should sign the inventory, agreeing to its contents. The process should be repeated at the end of the tenancy.
Making Fair Deductions from a Tenant’s Deposit: A Step-by-Step Guide
Landlords are entitled to make fair deductions from a deposit. This does not mean that a used item can be replaced with a better or new item, and it is important to ensure deductions are reasonable. Where possible, items should be repaired rather than replaced. No deduction is allowed for minor wear and tear.
It is recommended that landlords use the following process when making deductions from a deposit:
- Itemising what they intend to repair or replace
- Ensure that there are records of the former and current conditions
- Obtain quotes for repair or a replacement item
- Ensure that the work or new item is no more than reasonable and that normal wear and tear is not being compensated for
- Notify the tenant in writing of the deductions it is intended to make, providing evidence to back up the claim, such as the inventory, photos, video and quotes for work or a replacement item
- Communicate with the tenant where necessary, and if they do not agree, attempt to resolve matters through negotiation
- Where matters cannot be resolved amicably, contact the dispute resolution service associated with the deposit protection scheme. Again, it will be necessary to provide them with evidence to support
- The resolution service will examine the evidence and make an adjudication that both the landlord and the tenant will be bound by
Common Causes of Deposit Disputes
The most common causes of tenancy deposit disputes are:
- Disagreements over deductions based on the condition or cleanliness of the property
- Disputes over the value of a missing or damaged item
- Unpaid rent or outstanding bills
- Disagreements because no inventory was put in place at the start of the tenancy
- Disputes over whether wear and tear is fair or whether it constitutes damage to the property
Key tips for avoiding disputes include:
- Putting a detailed inventory in place at the start of the tenancy
- Consider inspecting the property during the tenancy to keep on top of condition issues
- Communicate clearly and politely with the tenant, explaining your reasoning if you intend to make a deduction and backing this up with evidence
- Be prepared to negotiate to find a solution
Resolving Tenant Deposit Disputes
It is advisable to try to resolve disputes directly with the tenant wherever possible. Your tenancy deposit protection scheme will offer a free dispute resolution service that can be used if you cannot agree on matters.
If the dispute cannot be resolved easily, the tenant should provide you with evidence of their case, and you need to put together your own evidence supporting your position. An experienced property letting solicitor will be able to guide you and ensure you have a strong case.
This could include a copy of the tenancy agreement, photographs of the property before the tenancy and now, a copy of the inventory and quotes for work needed to clean or restore the property or replace missing items. This evidence should be provided to the tenant and, if the case is dealt with by the tenancy deposit protection scheme.
The scheme will provide an independent adjudicator to go through all of the evidence and make a decision as to whether the deposit should be returned and how much can be retained.
Where a tenant cannot use a tenancy deposit scheme, they may decide to take legal action in court. If you are facing a claim, you can ask a solicitor to defend you to safeguard your position.
Contact our Tenancy Deposit Disputes Solicitors
Our skilled landlord solicitors offer full support for a wide range of landlord-tenant issues, including unpaid rent and disputes over deposit deductions. For details about our service offerings, please visit our commercial property page.
To discuss your case with one of our knowledgeable property and leasehold solicitors, call us at 0330 173 3980, email info@witansolicitors.co.uk, or complete our contact form. We’ll review your situation and explore how we can help.
