Tenancy deposits

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It is common practice for private landlords to collect a tenancy deposit to help protect them against any damage caused to the property by a tenant, or if a tenant doesn't pay their rent or bills. 

In April 2007, the government introduced the Tenancy Deposit Scheme to look after deposits and make the resolution of any disputes easier.  The benefit to a landlord is that it encourages tenants to look after the property that they are living in. 

There are two types of scheme, insurance and custodial based, and the government has selected three companies to run the Tenancy Deposit Scheme:

• The Deposit Protection Service  (Custodial)
• Tenancy Deposit Solutions Ltd.  (Insurance)
• The Tenancy Deposit Scheme (Insurance)

Within 14 days of receiving the deposit, the landlord must supply the tenant with: 

• information on which tenancy deposit scheme they have selected
• contact details of the selected scheme
• information on how to apply for the release of the deposit
• an explanation of the purpose of the deposit
• details on what to do if there is a dispute about the deposit

When can a landlord take money out of the deposit?

The deposit belongs to the tenant and should always be returned at the end of a tenancy unless the landlord has suffered financial loss.

One of the biggest issues landlords of houseshares and flatshares face is that they could be dealing with 2-8+ tenants, all who move in and out of the property at different times. This can cause arguments about who caused any damage to the communal rooms or property, as a landlord you can help protect against this by asking the tenants keep a log of any damage made and report any serious incidents to you as and when they happen.

Landlords can make some deductions for:

Cleaning deductions

Some tenancy agreements state that carpets and curtains must be cleaned to a professional standard before the tenant moves out. This does not however mean that they need to be as clean as when you moved into the property. Tenants are only required to clean anything which has been soiled and is above normal wear and tear.

Damaged property

If a property or its contents are damaged then the tenant should be expected to repair or replace the item. The tenant only needs to replace like for like, so if they damage an old fridge then they only need to replace it with an old fridge or pay the cost to get a similar fridge second hand.

The tenant is not expected to replace items with brand new items, and they are not expected to repair or replace normal wear and tear (e.g if the carpet has worn down from daily use)

Outstanding and unpaid rent

If a tenant still owes rent then the landlord is within their rights to deduct the outstanding rent from the deposit.  If the deposit does not cover the outstanding rent then the landlord can take the tenant to court in order to get their money back.

If a tenant withholds the last month's rent to try and counter this then the landlord can take the tenant to court to recover the missing funds.

Missing items

If the landlord believes that the tenants have removed an item then they can use the deposit money to replace this, but as with damaged property, the tenant only has to pay for like for like.

Even when a landlord has reason for keeping some of the deposit, the remaining deposit should be returned. The tenant is well within their rights to ask for receipts or estimates for any items which have deducted from their deposit.

Landlords are not permitted to withhold any of a deposit for reason such as "tenant had a noisy party despite the tenancy agreement forbidding them". This sort of claim is not only unreasonable, it’s also not legal. Landlords can only claim for any financial loss they have actually suffered.

In order to avoid any confusion or potential conflicts regarding deposits, it is a good idea to make a detailed inventory survey of the property.  The best way to do this is to have a detailed form listing everything in the house (including fixtures and fittings, carpets, walls) and walk around with the tenant rating the condition of each item on the list. Once the list is complete both you and the tenant should sign the inventory.