Security deposits make up an essential part of all private tenancy agreements. Without them, landlords may have some difficulty covering any unforeseen costs that occur during the tenancy, such as damages or rent arrears. Landlords are entitled to request a deposit from their tenants, although they are by no means required to do so in any legal sense. Once paid by the tenant, the security deposit is safely held in an official deposit scheme approved by the government. Then, if the tenancy agreement has been honoured and there are no damages to the property, the landlord is required to repay the security deposit (in its entirety) at the end of the tenancy. The cost of any damages or arrears is deducted from this final repayment.
Well, that’s the gist anyway, but hopefully most landlords know this stuff already! In what follows, we’ll be looking more specifically at what landlords can do to avoid getting into disputes over withheld deposits. Disputes over deposits often use up a lot of time and money for both parties, and if landlords wrongfully lose a dispute because they didn’t take the necessary precautions, the resulting costs could be serious. Disputes can arise as a result of several different factors, namely your relationship with a tenant and the procedures you use as a landlords.
Withholding a deposit
When a tenancy comes to an end, a landlord should assess the condition of their property and make sure that all terms in the original tenancy agreement have been met by their tenant. Unfortunately, this is often not the case, and landlords will be required to keep a certain amount of the security deposit in order to cover the cost of repairs. At this stage, the tenant can either accept the claims made by the landlord or dispute them. Let’s look at the legal reasons why a landlord may keep all or some of a security deposit provided by one of their tenants:
- Damages: In cases where the landlord discovers damages to the property that exceed the limits of reasonable wear and tear, they can make deductions to the deposit (equivalent to the exact cost of all necessary repairs) or retain the deposit in full. Damages can include uncleanliness, broken fixtures, leftover goods, and missing items.
- Rent Arrears: Landlords are entitled to make deductions to a deposit if the tenant has any outstanding rent at the end of their tenancy. Exactly how much of the deposit the landlord needs to keep depends on how much it takes for the them to cover all arrears, even if this means retaining more than the total cost of the original deposit.
- Utility Bills: In cases where the tenant still has outstanding utility bills after the tenancy (such as gas bills, water bills, or electricity bills) which are addressed to the landlord, their deposit may be withheld in order to ensure that the leftover costs are accounted for. Again, landlords can only keep the amount required to ensure full payment.
The worst case scenario when it comes to security deposits is that your tenant disputes your decision to keep a portion of their deposit and the matter ends up being taken to court. Unfortunately, disputes over security deposits can very easily devolve into “he said she said”, especially if the relationship between you and your tenant was already on shaky ground. Therefore, it is your responsibility to cover all your bases in order to prevent your tenant from making false claims that you could not feasibly disprove in a courtroom.
Many tenants feel entitled to get their security deposits back even if they have violated the terms of their tenancy agreement and are liable to pay for damages. Some tenants are overprotective, willing to go to great lengths to see their deposits returned even if this means being dishonest. Tenants are often told horror stories about dodgy landlords using questionable or misleading practices just keep a hold of deposits. You should bear this in mind when dealing with any questions or concerns that your tenants have about security deposits, approaching them with honesty and clarity, but no shortage of caution. This will ensure a more fruitful relationship, helping your tenants keep their side of the deal and making them less likely to initiate disputes.
You should follow best practices when handling and returning deposits, otherwise your tenants may be able to come up with legally valid reasons to dispute any deductions to their deposit simply because you were not able to cover all your bases. It’s your responsibility to prevent this. You need to ensure that your tenant has acknowledged the condition of the property and any existing damages when they move in (preferably in writing) Many landlords have been bitten by failing to do so, paying for damages that were not in fact caused by them because they were unable to provide sufficient proof that the damages were not there before the tenant moved in. As such, landlords should always create a situation that would hold up in a hypothetical courtroom by perfecting the process of returning deposits. What should these best practices be?
Inspections and inventories
Covering all your bases when it comes to avoiding disputes means performing an in-depth inspection of your property both at the beginning and the end of every tenancy. This allows you to note any major differences between the condition of your property at both points, and to ascertain whether or not any damages were present at the beginning of the tenant’s occupation. If your initial inspection is thorough enough, the tenant will be unable to falsely claim that any damages that they caused were already there when they moved in. If it is not thorough enough, there’s nothing stopping your tenants from refusing liability for damages they did indeed cause. As such, during the initial inspection of a property, landlords should always take detailed and high-quality photographs of the entire property to act a indisputable proof of its condition at the beginning of the tenancy. Get this report signed and dated by the tenant and give them a copy.
Maintenance and repairs
If landlords are required to perform any repairs or maintenance work on their property due to damages directly caused by a tenant during their time at the property, these works need to be properly recorded and documented. Once you have been invoiced, you can take the final costs of all maintenance work into account with your final deposit repayment (in addition to the cost of any work carried out during the tenancy for which the tenant is liable). To prevent a tenant from falsely disputing the accuracy of any deductions you have rightfully made to their deposit, you should keep all receipts relating to any maintenance jobs completed during or after the tenancy. If you do end up in a courtroom, these receipts could end up being your saving grace.
If you are a prospective landlord currently looking to purchase a new property in South West London, feel free to check out the sales we currently have available or have a chat with a member of the James Anderson team.