Understanding deposit disputes

Deposit disputes are possibly the single, biggest cause of friction between landlords and tenants. Avoiding disputes is always much better than having to resolve them. If, however, the matter does come to a dispute, you want to position yourself to win it. Here’s a helpful guide to understanding deposit disputes.


Understand the law

In the context of deposits, the first point you need to understand is that all deposits must be put into a government-backed Tenancy Deposit Scheme. If you’re investing in different parts of the UK, make sure you use a scheme that is valid for the area in which the property is located.

The second point you need to understand is that any deductions have to be clearly justifiable. This means that the reason for the deduction has to relate to a tenant’s failure to discharge their responsibilities. It also means that the amount of the deduction has to be proportionate to the damage.

If you do make deductions from a tenant’s deposit, then you have to explain the reason for the deduction in writing. Keep hold of any receipts backing up the cost. It’s a good idea to have at least one digital copy of it as well as a paper one.

Focus on prevention rather than cure

If you choose good tenants and communicate your expectations clearly you should have minimal problems.

Make sure that your tenant-selection process is clearly in compliance with the Equality Act 2010. You may never have dreamed of discriminating against people on the basis of protected criteria. It can, however, be surprisingly easy to act in a way that is considered indirect discrimination. In particular, keep in mind that it is illegal to refuse to accept a tenant just because they are on benefits.

Also, keep in mind that contracts have to be fair to be enforceable. For example, it is likely to be entirely fair to insist that the property be returned clean. Insisting that it is professionally cleaned may, however, be considered unfair unless there is a clear justification for it. Even then the requirements would have to be proportionate.

For example, if a tenant had pets, then it might be fair for you to require that textiles be professionally cleaned. You might, however, be on thin ice if you tried to insist that the whole property had to be professionally cleaned inside and outside.

Winning deposit disputes

There’s really only one way to win a deposit dispute and that’s to provide clear evidence that you are in the right. Typical evidence includes:

  • Your tenancy agreement
  • Your inventory
  • Communication between you and the tenant
  • Photos/video
  • Receipts

Photos and video can be exceedingly useful for winning tenancy disputes. For example, you could create an inventory that references pictures. You could then have the tenant sign off on both the inventory and the pictures.

You can also use video to explain what remedial actions you took and why. This can sometimes be a lot easier for a third-party to grasp than a written explanation, particularly a lengthy one.

Mark Burns