Ask the Expert – What are realistic expectations about tenant deposits?

Tenant deposits can be a thorny issue, particularly when deciding how much to return at the end of a tenancy – this is when problems most frequently occur. In my 20 years of letting experience, I’ve seen many landlords being rather unrealistic in their expectations when tenants vacate a property and therefore, in the amount of deposit they believe should be returned to the tenant. So perhaps it would be useful for me to draw on my experience and look at what sort of factors we take into account when returning a tenant’s deposit.

The start of a tenancy

At the beginning of a tenancy, the rules are simple. All deposits relating to Assured Shorthold Tenancies must be protected within a Government approved scheme. We hold a professional membership with the Tenancy Deposit Scheme where deposits are held until the end of the tenancy. The landlord (or letting agent) must protect the deposit and issue certain information to the tenant within 30 days, under the terms of the Housing Act 2004.

I would recommend that landlords think hard about what type of furnishings to put in a rental property. The standard and quality of furnishings should be matched to the calibre of tenant you hope to attract and therefore the level of rent you expect to achieve. Your letting agent should be able to help with this, while there are also furnishing companies around who specialise in providing furnishing packs for rental properties at different levels of the market. Clearly, more expensive furnishings will cost more to replace if damaged.

The inventory

Make sure a thorough inventory is completed at the start of a tenancy – this will be signed and agreed by both parties and will not only detail the furnishings and other items within the property, but also what condition they are in This will help to avoid disputes at the end of the tenancy. A professional letting agent will organise this for you.Our property management department provide a check-in service carried out by an independent inventory company – this is signed off by the tenant when they move in. At the end of the tenancy we arrange a check-out which is paid for by the tenant.

Wear and tear

I feel that landlords must be realistic in accepting that wear and tear is going to happen. A property will not be in exactly the same condition at the end of a tenancy as it was at the beginning. But landlords are receiving a rental income and usually benefit from capital growth too so they must be realistic.

There are real misconceptions as to how landlords can use a deposit. Some landlords expect to use the tenant’s deposit to make repairs to their rental property, however legally this cannot be done as the deposit forms part of the tenancy agreement.

Most repairs would need to be carried out whether the tenant was in the property or not, so their deposit cannot be used for this purpose.

Changes to the wear and tear allowance

From April 2016, the formal wear and tear allowance which allows 10% of rental profits to be written off for wear and tear will be replaced with a relief that allows landlords to claim a deduction for the capital costs of replacing furnishings and appliances such as sofas, beds, TVs, fridges, carpets, curtains, crockery, cutlery and linen. This won’t cover the cost of furnishing the property initially, just replacing items.

The end of a tenancy

I believe that communication – and maintaining a good relationship with the tenant throughout the tenancy – is key. If the landlord knows that a tenancy is about to end and they plan to let the property again, they’ll want it kept looking clean, neat and tidy so that it looks good for viewings. If the landlord has been on good terms with the tenant, they will be more likely to co-operate and any repairs and maintenance can be carried out when required throughout the tenancy.

What happens if there is a dispute?

Landlords or tenants can raise a dispute with their Tenancy Deposit Scheme and ask for an adjudicator to decide how much should be returned to the tenant. Typical problems might be if a chair from a dining set is broken and a landlord has to replace all four as the line has been discontinued.  Or perhaps several items of crockery have been broken and when the landlord tries to purchase replacements new ranges have been introduced which means a whole new set must be purchased. In these cases the decision would probably be in favour of the landlord.

Maybe a tenant has stained a carpet and the landlord believes the whole carpet throughout the property should be replaced. In this case, this would probably be seen as unreasonable.

As with most issues, communication and co-operation are always a better option before a dispute gets to this stage. I believe that diplomacy and experience are essential when dealing with the return of tenants’ deposits. This is why many landlords choose to use our property management service which takes care of all these issues for them and usually ensures that an agreement is reached amicably.

To find out more about our property management services, please contact us.