Naturally landlords seek to safeguard their rental property investment, with various measures such as the deposit schemes being implemented in these efforts. Whilst discussing finances can be a taboo for some, it’s safe to say it can be a contentious issue between landlords and their tenants. Transitioning between rental accommodation can be an expensive venture for tenants, made all the more difficult to meet obligations of advanced rent and numerous deposits, if locked in a bitter dispute with a previous landlord.
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What Can a Landlord Deduct From a Deposit?
Upon the close of the tenancy period the landlord has 10 days in which to either provide the tenant with the full amount taken for the tenancy deposit, or communicate any deductions that will be taken from this amount to the residents of the property. Any of the circumstance under which the landlord would not provide the tenant with the full amount would have been clearly stipulated in the tenancy agreement and therefore confirmed by the tenant.
It goes without saying that the specific reasons that a landlord would choose to withhold any amount of the tenancy deposit will be unique to their agreement and circumstance, however there are common reasons for why deductions are made.
Naturally, if at the close of the tenancy period the occupants of the property have any outstanding rental payments that are due to the landlord, these amounts can simply be taken from the tenancy deposit. This can be an alternative for some landlords that do not wish to go through the lengthy and arduous process associated with carrying out a section 21 order. However, it is important to remember that deductions from the deposit cannot be made until the fixed term has ended and is therefore not to be considered as a fast solution to problem tenants or rental arrears.
More commonly associated with the tenancy deposit is of course landlord’s ability to use this amount to cover any damage to the rental accommodation that may occur throughout the duration of the residents stay. This exclusively encompasses any damage caused by the occupants of the rental through neglect or malicious actions, with fair wear and tear being accounted for. Similarly, landlords are able to deduct any costs incurred through replacing any lost or broken furnishings or contents housed within the property.
Whilst this can be a contentious issue in some tenancies, especially when the tenant has returned the rental accommodation at the close of the tenancy in superb condition, however, if outlined in the tenancy agreement the landlord can also deduct the cost of having the rental cleaned.
How Do I Challenge a Deposit Deduction?
If the landlord of the rental property decides that they wish to make any deductions from the tenancy deposit before returning this amount to the tenant, they must inform the occupants with 10 days of the rental periods expiry.
The landlord is then obliged to return any amount of the tenancy deposit that is not being disputed, with the remaining sum being paid back to the deposit protection scheme. The landlord is further required to issue the tenants with an itemised list of the deductions they are intending to make from the deposit amount, allowing the tenant to accept, or dispute any of the charges. It is worth noting that the landlord is in the position where they must prove that the damage was caused by the tenant, therefore any pictures taken during property inspections, and the initial inventory will prove essential for both parties. Providing that the tenant reaches an agreement with the landlord over the deductions, the deposit protection scheme is simply notified, seeing them distribute the funds to the appropriate parties.
However, if an agreement cannot be reached tenants are often urged to implement the alternative dispute resolution offered by the tenancy deposit protection scheme. Upon this an impartial assessor will evaluate the circumstance, taking into account evidence put forward by the tenant and landlord. The adjudicator will then issue a verdict on how the funds will be distributed, which cannot be further disputed or appealed.
Importance of a Property Inventory
Taken at the outset of the tenancy period, a property curated inventory can be an essential tool for mitigation if a dispute were to arise between the parties of the tenancy agreement. This document comprehensively details the condition of the rental property and its contents prior to the current occupants moving in. The landlord, new tenants and a third party will typically inspect the entire property, specifically noting the condition of the properties furnishings, the contents that comprise each room, the functionality and safety of all gas and electrical appliances and outlets, including light switches and bulbs, alongside any visible damage, scuffs or other markings found on walls, carpets or upholstery within the property. Whilst this document thoroughly details the state of the rental, both the landlord and tenant are encouraged to take photographs of anything that is detailed within the property inventory; however it is worth stating that the tenant will need to have any of their findings signed by a witness for them to be upheld. Once the rental property undergoes a final inspection from the landlord the property inventory will be used as a definitive reference to the original condition of the rental, with any potential “wear and tear” being easier to establish.
What Deposits Will You Need to Pay When Renting?
Before moving into a rental property prospective tenants will be required to hand over multiple deposits to their landlord to secure their future home. But, for first time renters the process can be somewhat confusing, with relatively high amounts being charged before the tenancy begins its easy to understand how a future occupant could be on tentative hooks, especially if they are also required to pay rent in advance. However, tenants can rest easy knowing there is only a few costs they can insure prior to moving in.
Holding Deposit
Occasionally referred to by some landlords as a holding fee, the intent behind this is detailed by the name itself as a holding deposit is intended to essentially reserve a rental opportunity for an interested party. With the Tenant Fees Act 2019 outlining the regulations and conduct surrounding a holding deposit, the act stipulates that the holding deposit is a refundable amount that can be returned to tenants once they proceed with the tenancy agreement. This means that once both parties have confirmed the date on which the tenant will be moving into the property, the amount they will be paying in rent, the frequency at which they will be making these payments, the length of the rental period and the specific terms of the tenancy agreement; the tenant will be eligible to have the full holding deposit returned.
With this being said there is a specific circumstance under which the tenant would still have the full holding deposit amount refunded, without the tenancy agreement moving forward. If the landlord wishes to amend any of the pre-agreed terms that comprise the tenancy agreement after the tenant has already signed and handed over the deposit, if the tenant refuses to proceed in light of these changes the holding deposit must be returned by the landlord.
However, if the tenant decides to pull out of the agreement, the landlord is entitled to keep the tenancy deposit as compensation for taking the property of the market and any costs they may have incurred with establishing an agreement and the referencing process.
If the tenancy agreement proceeds and the tenants pass referencing checks then as mentioned the tenant will receive the full holding deposit amount. However it is worth noting that typically this amount is not simply returned to the resident’s bank account, but deducted from any initial rental payments they would be required to make.
Tenancy Deposit
Providing that both the landlord and tenants are satisfied with the included terms of the tenancy agreement and a move in date has been set, the future residents will more than likely be asked to pay the landlord a tenancy deposit. We say this as whilst it is not a legal requirement for a rental property owner to request a tenancy deposit from their tenants, it is highly uncommon for this to happen and in most cases the sum will be paid.
This amount, occasionally called a security deposit, is taken at the outset of a tenancy period and is hailed by some landlords as the best way to ensure tenants respect the condition of the rental property. Why is the tenancy deposit so revered by landlords? Well because whilst it is possible for the occupants of a rental property to have the full amount of the deposit returned, not unlike the holding deposit, however; this hinges on the tenant’s ability to property maintain the accommodation. This is because at the end of the tenancy period is the landlord find the rental to be in a state of disrepair they are able to deduct any costs associated with repairing damage to the property, repairing or replacing its contents, any rent left unpaid by the tenants, or any agreed upon fees, i.e. cleaning or replacing keys.
With this being said the rental property owner is not able to make deductions for every blemish they find upon an inspection and must account for “fair wear and tear”. As expected through high use over the course of multiple tenancy periods, some aspects of the property and its furnishings will start to show signs of wear; this cannot be levied against the tenant’s tenancy deposit. Fear wear and tear, whilst there is a lack of a strict legal definition, is the slow deterioration of the property or its contents in the form of appliances and furnishings, where the damage has not been intentionally or maliciously carried out but he occupants of the rental.
It is also important to note that the Tenant Fee Act 2019 also prevents landlords from charging exorbitant amounts in the form of a tenancy deposit. This regulatory move by the UK government means that the maximum amount a landlord is able to request from a tenant for a tenancy deposit has been capped. In cases where the rental property in question charges an annual rental fee of under £50,000, the landlord is able to request a tenancy deposit amount equal to the value of five weeks rent; however, if the amount the resident pays in rent is over this monetary threshold property owner is able to ask for up to six weeks rent from the tenants.
Once the tenancy deposit is paid to the landlord they will have a 14 day window in which to enter the sum into a government approved tenancy deposit scheme. Whilst rental property owners are not legally obligated to take a tenancy deposit from the residents of their property, if they do so the full paid amount must be entered into a protection scheme. Additionally, once the deposit is protected the landlord will have a further 28 days in which to issue the tenants with the details of the scheme in which the deposit was entered, alongside the address of the rental accommodation, the contact details of the landlord and any circumstance under which the full tenancy deposit would not be returned to the tenant at the close of the rental period.
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