Protecting a tenant’s deposit is one of the best-known landlord responsibilities, but simply placing the money in an approved scheme is not the end of the matter.
Landlords also need to make sure the deposit was protected within the correct timescale, that the tenant received the required information and that accurate records are retained throughout the tenancy.
A landlord who can prove the deposit was protected may still face problems if the accompanying paperwork was incomplete or late.
Protecting the deposit
In England, most tenancy deposits must be protected in a government-approved tenancy deposit scheme.
Landlords should keep clear records showing:
- the amount received;
- the date it was received;
- the scheme used;
- the date it was protected;
- the property address; and
- the names of the tenants connected with the deposit.
Do not rely solely on being able to log into the scheme at a later date. Keep your own file as well.
The prescribed information matters
The tenant must also receive the required prescribed information relating to the deposit and the scheme.
This is a separate obligation from simply protecting the money.
Landlords should retain evidence showing:
- what information was supplied;
- when it was supplied;
- who received it; and
- how it was delivered.
If a letting agent handles deposit protection, landlords should still be able to obtain evidence that both the protection and information requirements were completed properly.
Timing can be critical
Landlords should not assume that a late deposit registration can always be fixed simply by protecting the money afterwards.
The timing requirements matter.
A failure to comply can potentially expose the landlord to financial penalties and can also affect possession proceedings in some circumstances.
That makes deposit compliance something to check at the beginning of the tenancy rather than when possession is already being considered.
What happens when tenants change?
Deposit issues can become more complicated where:
- one tenant leaves and another remains;
- a replacement tenant moves in;
- the amount of the deposit changes;
- the tenancy arrangements are varied; or
- a property moves between different management agents.
Landlords should not assume that the original deposit paperwork automatically covers every later change.
Whenever the tenancy parties or deposit arrangements change, check whether fresh protection steps or updated information are required.
Keep a proper inventory
Deposit disputes often arise at the end of the tenancy rather than the beginning.
A landlord may believe a deduction is justified, but without good evidence it can be difficult to prove.
A strong deposit file should normally include:
- a detailed check-in inventory;
- dated photographs;
- meter readings where relevant;
- records of cleaning or condition;
- repair correspondence;
- inspection notes; and
- a check-out report.
The aim is to show the difference between the property’s condition at the start and at the end of the tenancy.
Fair wear and tear is not damage
Landlords should also distinguish between genuine damage and fair wear and tear.
A tenant is not normally responsible for the ordinary deterioration that comes from reasonable use over time.
Factors such as the age of the item, length of tenancy, number of occupants and original condition can all be relevant.
Trying to charge a tenant the full replacement cost of an old item may not be reasonable.
Avoid automatic deductions
Deposit deductions should be based on evidence.
Common areas of dispute include:
- cleaning;
- damaged furniture;
- missing items;
- redecoration;
- gardening;
- unpaid rent; and
- damage beyond fair wear and tear.
Landlords should be able to explain why the deduction is being proposed and how the amount was calculated.
Keeping invoices, estimates and photographs can be very useful.
What if there is a dispute?
Deposit schemes provide dispute-resolution procedures that can often be used without immediately going to court.
The quality of the landlord’s evidence will usually be important.
A landlord who has maintained a clear tenancy file from the start is generally in a much stronger position than one trying to reconstruct events after the tenancy has ended.
How does the position differ elsewhere in the UK?
The basic principle of protecting tenancy deposits exists across the UK, but landlords should not assume that the rules are identical.
Wales has its own occupation-contract framework and deposit requirements.
Scotland operates its own tenancy deposit scheme rules and timescales.
Northern Ireland also has separate deposit-protection legislation.
Landlords with properties in more than one nation should therefore use the correct procedure for each jurisdiction.
Carry out a deposit audit now
Landlords should be able to answer five simple questions for every relevant tenancy:
- Was the deposit protected correctly?
- Was it protected on time?
- Was the required information supplied?
- Can you prove that it was supplied?
- Is the inventory strong enough to support any future deductions?
If any of those answers is uncertain, the tenancy file should be reviewed.
Deposit protection is not just about putting money into a scheme. It is about proving that the whole process was handled correctly.
NetRent’s Landlord Legal Updates will continue to explain important legal and regulatory issues affecting landlords, letting agents and tenants across the UK.
NetRent also supports landlords with landlord insurance, mortgages and property sales.
Telephone: 01352 721300
Email: support@netrent.co.uk
Important information
NetRent does not provide legal advice. The articles represent our understanding of rental property law and are for general information only.