News

Protecting and Claiming from My Tenant’s Deposit

Mar 19, 2024

Original article from Landlord Vision  by Mary Latham Protecting and Claiming from My Tenant’s Deposit

 

Way back in the late 90’s when the Housing Act 2004 was on the cards I was a member of the Executive of the National Federation of Residential Landlords, representing 52 landlord associations across the UK, long before NRLA or even NLA. Each member of the Executive was assigned a part of the proposed Bill and mine was deposit protection.

In those days there was no limit to the amount of deposit a landlord or agent could take, and there was no control over where it was kept (this led to several landlords and tenants losing the deposits when unregulated agents (they were all unregulated in those days) walked away with the money and disappeared. There was also no redress for tenants when a landlord was withholding their money (yes, it is the tenant’s money until we prove we are owed it) and unfortunately, some landlords and agents were unscrupulous and simply wouldn’t pay the deposit back knowing that the tenant probably couldn’t afford to take legal action. This led to the common practice of tenants not paying their last month’s rent to make sure that they were not out of pocket and instead left landlords out of pocket for cleaning and damages/losses. It didn’t really work for anyone, and it was no surprise that it was high on the list of items which would be covered in the new Bill.

The government were minded to copy other countries and introduce a national custodial deposit scheme where all tenant’s deposits would be lodged.  One of the places where this was in already happening was New South Wales in Australia and we set about contacting landlord’s representatives there.  We were warned that the bureaucratic rigmarole needed in order to release the deposit to either the landlord or tenant meant that tenants needed two deposits and landlords would often wait months before being paid a justifiable claim. We were told to find an alternative because that didn’t work any better for anyone than the lack of a system. One of my colleagues came up with a good alternative which eventually became the insured option. This would allow landlords the choice to pay a small premium and hold the deposit in our own accounts, the premium would pay for independent arbitration as would the interest on the other alternative: the custodial scheme. I had the job of persuading the senior civil servant who worked for the Deputy Prime Minister, one didn’t speak directly to ministers in those days, and it hadn’t been long since no one in government spoke to a landlord officially at all.

As we know when the Housing Act 2004 was introduced there were indeed two options the one which I had proposed and the alternative of a custodial scheme both run by government-approved contractors and no big national scheme with all the drawbacks.

My claim to fame is that I managed to make a major change to Part 6 of The Housing Act 2004

Housing Act 2004 (legislation.gov.uk)

This same Act is, of course, where licensing mandatory selective and additional was also introduced and the new method of assessing fitness the Housing Health and Safety Rating System and with those bedfellows Tenancy Deposits Protection became legal without too much fuss, from 6th April 2007.

The reason I am writing about this all these years later is that, despite this legislation, deposit protection is still failing both landlords and our tenants and remains one of the biggest bones of contention between us. Having observed many, many discussions on my Facebook group, which aims to help to heal the relationship between landlords and tenants and which has over 20,000 members, I realise that neither landlords nor tenants really understand deposit protection and the breakdown of relationships between us comes from this lack of understanding.

PROBLEM NUMBER ONE – Not understanding the law

  • A deposit is any money taken which is not rent due or an initial holding fee (which must not be held beyond the signing of the contract).
  • Rent in advance becomes a deposit if it is taken before the contract says its payable.
  • A maximum of the equivalent of 5 weeks rent can be held as a deposit.
  • The deposit must be in a scheme and the certificate and Information for Tenants provided by the scheme must be given to the tenant (with confirmation of receipt) within 30 days of PAYMENT.
  • The maximum compensation a court will award a tenant if the deposit hasn’t been registered with a government-approved scheme either by paying it into a custodial scheme at no cost or paying a small premium and holding the deposit in the landlord’s account, is THREE TIMES THE AMOUNT OF THE DEPOSIT for each tenancy agreement that is signed.
  • If the deposit was not protected as above it must be returned to the tenant before a valid section 21 can be served but this doesn’t prevent the tenant from getting the compensation above.

All that is very straightforward, at least I thought so until I began reading posts on FB from landlords who had not complied with the law. They were astonished and often angry to be told that they could now face paying thousands in compensation. Even to a delinquent tenant and even after the tenant has left the property with the full deposit returned.

PROBLEM NUMBER TWO – Understanding how it works

  • The deposit is the tenant’s money until we can prove that we are entitled to compensation from it.
  • We cannot achieve “betterment” in other words improvements or new for old.
  • We must allow for normal wear and tear and there is a Guide for this here:

A guide on the life expectancy of rental property products (mydeposits.co.uk)

  • If we need to claim from the tenant’s deposit, we must prove to the scheme arbiters that we are justified and that usually means a detailed Inventory at the start and end of the tenancy signed and dated by the tenant. This Inventory should include the manufacturers In Use and Safety Instructions. The date when the item was new should also be listed to help calculate compensation later.
  • If we are holding the deposit because we used the insured scheme, we will be asked to lodge the disputed amount with the scheme and return the balance to the tenant.
  • The arbiter’s decision is final and cannot be challenged.
  • The arbiters will tell the landlord and tenant what they have decided and return the money to the relevant person/people.

PROBLEM NUMBER THREE – Unrealistic expectations

  • By far the biggest issue is the mismatch of expectations between the landlord and tenant.
  • Misunderstanding of what is considered fair wear and tear by either party.
  • Misunderstanding of life expectancy by either party.

PROBLEM NUMBER FOUR – Emotional exchanges caused by:

  • Letting a property which was once your home.
  • Letting a property which you have spent a lot of money on.
  • Not inspecting regularly.
  • Tenants with poor standards.
  • Landlords who don’t accept what is reasonable and fair.

In my February article, I spoke about the issue of “gifting” large appliances to tenants to avoid having to maintain them and how it all goes wrong when the tenant takes that item, like a fitted oven, when they leave because you did gift it to them.

In a recent case on my fb group, a tenant had replaced the landlord’s carpets because they were worn, and the landlord didn’t want the expense. The landlord had agreed to the tenant replacing the carpet at their own expense.  At the end of the tenancy the landlord wanted to claim, via the letting agent, for having the carpets professionally cleaned because there is a mark on the carpet that wasn’t there at the start of the tenancy.  Of course, the mark wasn’t there neither was the carpet until the tenant paid for it and had it fitted! I am often shocked at the fact that Agents don’t make their clients understand deposit claims – perhaps they don’t understand either. The landlord would not give in, and the tenant was advised to put in a dispute with the deposit scheme

Often, landlords put expensive items into their rented properties, and they expect those items to last longer because they are expensive. That is a fair expectation in terms of the items continuing to operate as it should, but it isn’t realistic in terms of a tenant using it, because they probably don’t know what it cost and some tenants take care of things and some do not. Some tenants are good cleaners, and some are not and landlords become angry because they believe that tenants are being disrespectful and deliberately misusing items or not keeping them as clean as they themselves would. Tenants who believe that they have done their best become offended by the accusation.

It is usually a mistake to buy expensive items, even at the high end of the market, but if we do, we need to inspect regularly and keep an eye on these items ongoing throughout the tenancy. We have to recognise that everything has an expected life span and beyond that, the item is a write off regardless of the condition it was in at the start of the tenancy.

PROBLEM NUMBER FIVE – What does Fair wear and tear actually mean?

I dislike words like “fair” and “reasonable” in legislation but it is there and we must therefore navigate around the different opinions on what this means and this is why it is so important to read the guide which I have linked before making a claim from your tenants deposit, this can avoid long drawn out discussions and gives credibility to your claim when the tenant understands that arbiters use this when deciding on a claim.

Before we look at some of the items in the Guide, let’s look at clean. We can no longer ask a tenant to return our properties having had them professionally cleaned – this was outlawed in the Tenants Fees Act 2019, and yet many landlords do try to force their tenants to do this.  We can, however, ask for the property to be cleaned to a professional standard. There is another unhelpful word “professional” that very much depends on the skills of the professional cleaner and is why I am still cleaning all my own properties – I need them to be my standard of clean but I do not expect this from a tenant when I know that I can’t get it from a cleaner and  that I set a high bar. I am happy if they are visually clean, and I will go into places where mostly only spiders dwell and use products that will restore items to almost new myself.

In a recent case on my FB group a landlord was trying to charge the tenant for dust on the skirting boards and windowsills! A week after the tenant left. That caused quite a stir, it wasn’t the £50 charge it was the utterly ridiculous claim which makes us all look like money grabbers.

These are the things in the Guide list that must be taken into consideration:

  • Quality and original condition
  • The length of the tenancy
  • Number and age of occupiers
  • Nature of the item
  • Nature of the deterioration

The thing missing from this list is the age of the item because the guide goes on to give the expected age of most common items after which we will get no compensation because we have not lost any use.

Turning to some of the most common claims:

Decoration 3-4 years in most of the house

Scuffs and small marks are normal wear in a property and over 3-4 years they will get to the point where the wall needs to be repainted.

A tenant moves into a newly decorated living room. The tenancy ends after two years and there are more than a few scuffs and marks causing the wall to need to be repainted. The landlord has therefore lost 2 years (50%) of the life expectancy of that decoration and can claim 50% of the cost of having it repainted in compensation.

The same tenant leaves after 4 years and the room needs completely redecorating because the walls are badly marked. The landlord has already had the full life expectancy and will not be awarded any compensation for having it repainted.

Carpets Budget 3 years Better Quality 8 years+

If you fit a rented house with cream carpets and let to a family, you need to be very realistic about what to expect back at the end of the tenancy. If you fit a grey/brown “landlord quality” carpet which is washable you can expect much more ironically because spending more doesn’t always mean that the item will stand the wear and tear, depending on the type of tenant.

If you let the property to adults and it’s fitted with cream good quality carpet you can expect it to last 8 years and if it needs to be cleaned, you can ask for it to be cleaned but you cannot ask for it to be professionally cleaned as with general cleaning.  You can, however, claim if you need to have it professionally cleaned and it has not been fitted for 8 years.  On the other hand, if there is an iron mark (as there so often is) and the carpet needs to be replaced because it presents a trip hazard, the amount that can be claimed comes back to the amount of wear the landlord has lost.  If the carpet was in perfect order at the start of a 3-year tenancy and now has an iron burn, we need to check the inventory to find out how old the carpet was to begin with. The Inventory says that at the start of the tenancy the carpet had been down for 2 years therefore at the end of the 3 years tenancy the carpet was 5 years old therefore the landlord has had 62.5% of the expected lifespan and can claim the loss of 37.5% of the cost of replacing the carpet on a like for like basis, the cost of removing the original carpet and fitting the new one.

Some landlords get very caught up in what has caused the need for cleaning or replacement, but in fact, that is irrelevant, unless it is an accident which is covered by insurance we can fairly claim the proportion of our loss and this is what needs to be explained to the tenant rather than making judgements about how it happened or could have been avoided.  This is business, no tenant wants to lose money from their deposit and few people recognise the actual cost of items and services if they have not had cause to use them. This is why we must provide quotes or invoices to back up our claims and we cannot claim for our own time.

Yet another cause for much comment on the FB group was a landlord who was making a deposit claim of £500 on top of the works for supervising the contractors!!!

Finally

We are in the business of letting complete strangers live in our investment properties and we have no idea about their standards, therefore some of them will have a different idea of clean to us and we need to allow for that because without those strangers renting our properties, we haven’t got a business.

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