Tips to minimise the risk of a deposit dispute at the end of a tenancy

In the post-tenant fee ban era, it's more important than ever to minimise the risk of a costly deposit dispute at the end of a tenancy, says Suzy Hershman of mydeposits

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As the dust settles on the tenant fee ban, landlords and letting agents are increasingly likely to be picking up a greater share of the tenancy set-up costs than they were prior to the ban. It is therefore more important than ever to take all possible precautions to minimise the risk of a costly deposit dispute at the end of a tenancy. In the post-tenant fee ban world, gathering evidence and keeping robust written records from the outset of a tenancy will be key to preventing any deposit related issues from eating into profits at the end of the tenancy.

Link to business tipsSuzy Hershman, Head of Dispute Resolution at Hamilton Fraser’s mydeposits, offers the following tips to help you avoid deposit related disputes at the end of tenancies:

Top tips to avoid end of tenancy deposit disputes

1. Make sure your tenancy agreements are updated to reflect the tenant fee ban; most importantly they must not include any of the prohibited fees. Under the ban, the only permitted payments are:

  • A capped refundable holding deposit
  • Rent
  • Payments for council tax, utilities, television licence, communication services and Green Deal charge
  • Default fees for interest on late rent payments and for loss of keys or security devices
  • For a variation, assignment or novation of a tenancy
  • For the early termination (surrender) of a tenancy

Do not underestimate the severity of charging a prohibited payment which carries a £5000 penalty ‘per fee’. The enforcement authority may impose a financial penalty of up to £30,000 for repeat offenders within 5 years. If convicted of two financial penalties within a 12 month period, a landlord or agent may be entered into the Database of Rogue Landlords and Letting Agents. If you do accidentally take a fee for a prohibited payment, it must be returned to the tenant within 28 days to avoid a penalty.

2. Although under the tenant fee ban tenancy deposits are capped, the legislation does not have any impact on how deposit deductions currently operate.

3. Good quality inventories are paramount and should include clear photographic evidence alongside the descriptive written word on the standard of cleanliness, as well as condition, as the majority of disputes involve cleaning. This will allow letting agents/landlords and tenants to make an accurate comparison of the property from the start of the tenancy to the end, and negotiate any potential deductions.

Before the tenant fee ban, you may have relied on an independent inventory company completing your reports, as the tenant might be covering some of the costs. Looking to reduce costs in the post-tenant fee ban world, you may choose to take this service in-house. However to protect your clients’ investment and ensure clarity and an evidence-based approach to damages and disputes, quality inventory reports are more vital than ever.

4. Keeping written records of any conversations, emails and contractors’ reports can support the information in the inventory reports and help with negotiation on any proposed deductions at end of tenancy.

5. Invoices and estimates should give a clear breakdown of costs, for transparency, in the event of needing to calculate and negotiate a deposit deduction.

When it comes to fair wear and tear, remember a tenant isn’t responsible for reasonable wear and tear, which will inevitably happen over the course of the tenancy. Any proposed deduction on condition must take into account the age, quality, condition at the start, reasonable lifespan and the length of the tenancy/The number and type of tenants that live in your property may also affect how much wear and tear there is. So, if a landlord or agent suffers a loss as a result of a breach of the tenancy agreement which is covered by the deposit clause, an amount can be deducted. Of course, the amount deducted should be reasonable and reflective of the landlord or agent’s actual loss.

6. For more information on the impact of the tenant fee ban on the deposit cap, read our guide, The tenancy deposit cap – what you need to know.

As long as both you and your tenant are realistic, reasonable and clear about your responsibilities, there should be no reason for a deposit dispute at the end of a tenancy. In the interests of time and everyone being able to move on, be willing to negotiate and compromise on costs. In the post-tenant fee ban world however, ensuring that you follow a quality evidence based approach throughout the tenancy, will be more vital than ever.

About mydeposits

mydeposits is one of the three government approved UK schemes designed to ensure landlords fulfil their legal obligations and comply with deposit protection legislation. It is the only scheme to operate throughout the UK, Northern Ireland and Jersey.

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