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A Landlord Guide to Deposit Deductions

In most cases, tenants return rental properties in the same condition as when they moved in - with some allowable wear and tear.

But when the property is returned in a worse condition, a landlord can consider making deductions from the tenants’ deposit to cover their financial loss in making the property good again for the next tenancy.

Disputes between landlords and tenants often arise as a result of differing interpretations of what is ‘fair wear and tear’, and knowing what is a reasonable deduction to propose is crucial in obtaining a swift resolution.

What is Wear and Tear, and What is Fair?

Wear and Tear is the term used in the context of residential letting as the ‘reasonable use of the premises by the tenant and the ordinary operation of natural forces”.  This may mean the odd minor scuff to a wall or a spot stain on a carpet.

What constitutes “fair” wear and tear in terms of a rental property is not a straightforward question to answer.

Many factors such as the size of the property and who the inhabitants are will inform the judgement of what is and is not fair.

Length of tenancy, tenant type, family make-up, and the lifespan of the item/decoration in question all need to taken into consideration when calculating how much of the cost of repair can be charged to the tenants.

As an example, a large family will have a more generous definition of what might be a “fair” wear and tear allowance than a single professional.

Check Ins and Check Outs

Inventories are vital pieces of evidence in confirming the condition of the property and its contents at the start and the end of the tenancy. If conducted independently, they will give more weight to any claim made. Ideally, the tenant should have signed the report, or at least the landlord should have evidence to show they were provided with a copy and the opportunity to make amendments within a set period of time.

Where the check out report shows areas damage that are tenant responsibility such as cleaning or excessive wear and tear, a deduction from their deposit to cover the cost to make good may be appropriate.

It is important to take into consideration the whole of the report when deciding what deductions to propose and to calculate those deductions fairly, and without making the property’s standard better than it was when the tenant moved in.

Apportionment and How is it Calculated

Apportionment is a term that means the cost of making good or repairing is split between the landlord and the tenant.

In most cases, there needs to be an apportionment calculation made as everything inside a rental property has a lifespan which is always depreciating.

The only exception to this rule is cleanliness. If the property is clean at the start of a tenancy, it is expected to be at the same level of cleanliness at the end of the tenancy, and a full cleaning charge can be made to the tenant to put right if it is not.

That said, if a property isn’t particularly clean at the start of a tenancy but is returned in a worse condition and a professional clean is now required, the deduction from the tenants’ deposit would need to be apportioned. The tenants could only be liable for the portion of the cost that gets the property up to the standard it was given to them in – not the portion that leaves it in a better condition.

Using a tenant’s deposit to make improvements (rather than repairs) to the property is called betterment, and is not lawful.

What you are trying to reach as a landlord in dispute over a deposit is the appropriate level of response to dilapidations to achieve a positive outcome for both parties.

Example Apportionment Calculation

During their 12 month tenancy, the tenant accidentally burns the carpet which was brand new at the start of their tenancy. The burn cannot be repaired - therefore a replacement carpet is required for the next tenancy.

In this case, the apportioned cost would be worked out based on the cost of the replacement carpet against the age of the previous carpet and its expected lifespan.

If the expected lifespan of a carpet is 10 years and you need to replace the carpet after 1 year due to tenant damage, a higher amount would be apportioned to the tenants than if you need to replace the carpet after 9 years of damage.

We would work this out as: £200 divided by 10 (years expected life span) x 9 (years lost due to tenant damage) = £180.00 (tenant liability)

Undisputed Deposits

Any balance of the deposit that is not being disputed must be returned within 10 days. For example, if you are negotiating deductions of £25 from a £100 deposit, the other £75 is not being disputed and must be returned.

Alternative Dispute Resolution (ADR)

If an agreement between landlord and tenant cannot be reached regarding the deposit, either party can request for ADR. This service acts like a small claims court, and landlords and tenants get to submit evidence to prove their entitlement to the deposit. If either party does not submit evidence after agreeing to use ADR, the deposit will automatically be awarded to the other party.

If the claim for deductions from the tenant comes to more than their deposit total, the landlord may wish to take action through the County Court.

The deposit money is always considered to belong to the tenant.

McCartan Lettings lodges all tenant deposits with the Deposit Protection Service, and we are fully trained in the best ways to negotiate through stressful and costly deposit disputes.

Positive Property Management

Ultimately, prevention is better than cure. Making sure the property is regularly visited, maintenance dealt with promptly, and that landlords/agents communicate regularly and clearly what their expectations are of the tenants during their tenancy and before they leave, should help avoid costly disputes arising at the end.

If you’re fed up with difficult end of tenancies, or just looking for an agent invested in positive property management, please give the McCartan team a call on 01792 430100, or click here to email us.

Sources: Apportionment examples from Property Mark
Related: Why is Section 21 Big News? / Let on the First Viewing - Twice!

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