How Do I Dispute a Tenancy Deposit Deduction?

Written By PropertyLoop
June 28, 2021

What Is a Tenancy Deposit?

When a tenant is moving into a rental property they will be required to pay the landlord a tenancy, or security deposit. This amount will most commonly be around the equivalent cost of five weeks rent and will need to be paid before moving into the rental property. Unlike the Holding deposit that is “refunded” to the tenant somewhat quickly through a reduction from their initial rental payment, tenants will have to wait far longer to potentially see their tenancy deposit returned. The amount taken is intended to make the tenant more accountable if they deviate or fail to adhere to the terms outlined within the tenancy agreement.  Whilst the tenancy deposit is commonly associated with tenants that neglect the condition of the rental property, the deductions a landlord can make from the returned amount can also help them recuperate rent arrears.

Tenancy Deposit Protection Schemes

Once the tenancy deposit has been paid to the landlord, they will have 30 days in which to enter the taken amount into a government approved tenancy deposit scheme. It is worth noting that although it is extremely uncommon that the owner of the rental property will not request a security deposit from their tenant, they are under no legal obligation to do so; however, if they do request their tenants pay a tenancy deposit, the taken amount must be protected by a scheme.  

Within the same 30 day time frame following the landlords receipt of the tenancy deposit they will be required to provide the tenants will confirmation of the details of the tenancy, the deposit and the scheme under which the taken amounts are being protected. The landlord will need to detail the address of the rental property, any amounts taken for a deposit, the extract scheme into which the deposit has been entered, the reasoning for any potential deductions to be made from the amount being returned to the tenant, alongside where to turn if there is a dispute regarding the deposit and if the tenant is unable to establish contact with the landlord at the close of the tenancy.

Regardless of if the landlord has chosen to enter the amounts taken for the tenancy deposit into an insurance based, or custodial based protection scheme they will be prohibited from accessing the amounts throughout the duration of the tenancy period. Once the rental period has come to an end, the tenant will be required to contact their landlord to request the tenancy deposit is returned, the landlord will then be required to distribute the funds with consideration for any agreed upon deductions, within 10 days.

How Much Can a Landlord Take for a Tenancy Deposit?

With the implementation of the tenant fees act 2019, a threshold was established on the maximum amount a landlord is able to take from new residents for the security deposit. The act demands that if the amount a landlord requests their tenants pay each year in rent is up to £50,000, the occupants of the property will only be required to provide up to five weeks rent for the tenancy deposit. However, in the case where the annual rental charge for the rental opportunity is over this £50,000 threshold, the landlord is able to ask for up to six weeks rent from their new tenants for the security deposit.

Whilst first time tenants will understandably have apprehension about handing such a large amount over, considering this will not be refunded in the near future, or unlike the holding deposit, be deducted from an imminent rental payment. However, it is important to remember the purpose of the deposit and that from the landlord’s perspective; this initiative provides an extra incentive to allow a tenant into a rental opportunity, making renting more accessible in the long run. With this being said, for tenants that are searching for their next home whilst meeting their current rental obligations, saving for a holding deposit and potential rent in advance payments, alongside up to five weeks rent for the tenancy deposit, it’s easy to see how this can present a potentially insurmountable financial obstacle for both new and experienced renters.

What Deductions Can Be Made From a Tenancy Deposit?

As previously mentioned, when the tenancy deposit is provided to the landlord, they should thoroughly detail the conditions under which the tenant would not have the full amount returned to them at the close of the rental period. Generally speaking deductions are made from the tenancy deposit when the tenant fails to abide by the conditions of the tenancy agreement; however, the application of the deductions can be more accurately said to cover the landlord for the associated costs of the tenant’s actions.

If at the close of the tenancy agreement the occupants of the rental property have breached the terms of the tenancy agreement and fallen behind in their rental payments, or has neglected to pay their utility bills, the landlord is able to deduct the appropriate amounts from the tenant’s tenancy deposit.  However, this is not to say that if you begin to accumulate rent arrears there will be no repercussions, the amount the landlord is able to recuperate through these deductions is limited to only 5 weeks rent, lending itself to why many rental property owners choose to request the maximum deposit amounts from their tenants. Because of this many landlords will seek out a more immediate resolve for the outstanding rental payments and possibly pursue eviction proceedings. Perhaps more commonly associated with the tenancy deposit, the landlord is able to make any deductions for the associated costs of repairing or replacing any items that were damaged by the tenant.  

Disputing Deductions Made by the Landlord

At the close of the tenancy period the landlord will have 10 days in which to notify the tenant of any deductions being made from the amount of their tenancy deposit being returned should be stated alongside the justification for the deduction.  With this being said, the landlord is not able to simply make any deduction they please as these must first be proposed to the tenant. Providing that the occupants of the rental property agree with all of the proposed deductions as reasonable, then the appropriate amounts will be distributed by the deposit protection scheme currently holding the taken amount.

However, if the tenant chooses to challenge any deductions from the tenancy deposit the protection scheme will maintain possession of the funds whilst the dispute is mediated by the scheme’s dispute resolution service. Providing that both parties of the tenancy agree to take the matter to the dispute resolution service, they will act as an impartial adjudicator, trying to reach a compromise or resolve than is to the benefit of both parties.  This impartial assessor will evaluate the evidence presented by both the tenant and the landlord, typically consisting of the inventory report for the property, receipts for the tenancy deposit and any communication between the rental’s owner and its occupants that regarded the deductions being made. Once the dispute resolution has considered the evidence and reached a verdict their decision must be respected as final, with neither the landlord or the occupants of the property =being able to appeal this decision further. Further to this the deposit protection scheme will manage the distribution of the funds to the appropriate parties.

Taking Your Landlord to Court

With this being said, if at the end of the rental period it comes to light that the landlord never entered the tenancy deposit into a government approved tenancy deposit scheme, the tenants will not be able to consult the dispute resolution service and have to take the matter to court. However, if the tenants do pursue this legal action, the landlord could not only be compelled to pay back the deductions, but up to three times the amount originally taken for the tenancy deposit as the landlord neglected their duty by not entering the amount into a scheme.

Before the matter is taken to the court, the tenant must first present their landlord with what is referred to as a letter before action, making the tenants intentions to pursue legal action clear as the deposit has not been returned. This correspondence should clearly establish a deadline for the landlord to respond by, alongside the appropriate document for the courts, in this case a N208 form.

The courts will demand that the tenants supply them with a copy of the original tenancy agreement, the property inventory, documentation of the condition of the rental and sufficient proof that rental payments were constantly made.

The Property Inventory

If an occupant of the rental property wishes to challenge a deduction being made from their tenancy deposit, they will come to heavily depend on the property inventory. This document comprehensively details the condition of the property from the outset of the rental period, with these findings being compared to the final property inspection to reveal any damage caused during the fixed term.

At the start of the rental period the landlord will accompany the new tenants around the rental property allowing them to document the condition of any furnishings, markings or blemishes on walls, the functionality of appliances alongside any tears in upholstery items and the general condition of the rental opportunity. During this inspection both parties are encouraged to gather as much evidence as possible, making notes and taking photographs of the appropriate arrears in the property.  This is because at the close of the rental period another inspection will take place with the state the rental being compared against the evidence documented at the outset of the tenancy agreement.

As can be expected, if the landlord decides to make deductions from the amount of the tenancy deposit that is being returned to the tenant both will come to rely on their findings from the property inventory assessment; however, only evidence collected during the inspection that has been signed by a witness will be considered valid if later presented during a dispute.

What a Landlord Cannot Make Deductions for

As can be expected, after numerous tenancy periods and swathes of tenants moving in and out of a rental property, some items and areas of the rental will being to show sign of high use, stress and wear. With this in mind, despite the intention behind the tenancy deposit being to empower landlords in making their residents more accountable for the condition of their rental, deductions cannot be made for what is considered to be “fair wear and tear”. But what is fair wear and tear?

Whilst the phrase is somewhat ambiguous it does offer significant protection to tenants that would otherwise see far less of their tenancy deposit be returned. Put simply, wear and tear is the expected degradation of a property, its furnishings and appliances that comes with prolonged periods of high use.  If the tenant wishes to appeal any deductions being made from their deposit that they believe to be fair wear and tear, the impartial assessor will consider the specific item that has been damaged and its expected lifetime, alongside the age of the item and its condition at the start of the tenancy.

It is also worth noting that the landlord is unable to charge the tenant for the upkeep or replacement of appliances such as central heating, boilers, sinks and baths, amongst electrical appliances, unless the damage was explicitly caused by the tenant. The same regulations would apply if the landlord wishes to impose the associated costs of repairing the external structure of the rental, comprising the external walls, floors, roofs, foundations gutters and drainage systems for the property.

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