Winning Deposit Disputes

Tenancy Deposits:

Landlords often fail to win tenancy deposit disputes, not because the claim is unjustified, but purely because of the way they have gone about claiming, and usually because they have insufficient evidence to support their claim.

A recent case involving a tenant with a pet cat leaving fleas behind in the property is a prime example of how a deposit claim can be won or lost on the way the claim is presented and the available evidence.

In this case involving a dispute of £180 for the pest controller’s fees, the dispute went to the scheme’s arbitrator who awarded for the landlord.

Despite the tenant’s arguments to the contrary and evidence put forward the landlord claimed that the tenant left behind a flea infestation which had to be irradiated professionally.

Claims for pet related costs are likely to increase because (1) the government is encouraging landlords to take in more “well behaved” pets, and (2) the tenant fees act now restricts the maximum deposit a landlord can take to 5 week’s rent, leaving landlords the only option for their protection, when pets are involved, to charge a higher rent.

According to Property Eye, in this case the landlord claimed the tenant should pay for the cost of treating the flea infestation at the property. But the tenant denied there was any evidence of fleas at the property when they left, and put forward convincing evidence that their cat was flea-treated by their vet and had never had fleas.

The landlord submitted the following evidence to the adjudicator:

• dated and signed check-in and check-out reports
• invoice in the amount claimed from a pest treatment contractor
• a statement of opinion from the contractor
• various emails between landlord and tenant
• a photograph of a flea-bitten ankle.

The tenant submitted submitted:

• Various documents relating to their cat’s vet treatments
• receipts for the purchase of pet flea prevention treatments.

No mention of fleas was made on the check-in report, but the photograph of the flea bitten ankle appeared to have been taken at least a week after the tenancy had ended.

This evidence the adjudicator thought was insufficient, but what swung it for the landlord was the pest controller’s statement that showed a flea infestation was present at the property, two weeks after the tenancy had ended, with no other occupation in between.

Further, the tenancy agreement set out the landlord’s agreement that the tenant could keep a cat at the property, stipulating clearly the tenant’s responsibility for any costs arising for damage or to eradicate any pests caused by or resulting from the presence of the animal in the property – the relevant clause in the agreement stated stated very specifically: “The tenant will be liable to compensate the landlord for any losses due to flea infestation by an animal of the tenant, his family or his visitors”.

Whether disputes like this one go to the deposit scheme’s dispute arbitration or a county court, the principles are very much the same and there are a couple of lessons to be drawn here:

1. Documentary and independent evidence is vital. This, including any photographs, must be dated and confirmed independently.
2. The tenancy agreement must set-out very clearly the obligations and responsibilities of the parties for these eventualities.

These measures are particularly important where pets are involved, but also for other potential damage such as condensation, rent arrears issues etc.

Landlords take deposits to give them financial security should tenants: (1) cause damage in the property, (2) leave the place needing extensive cleaning, (3) leave possessions in the property which need expensive removal, or (3) leave owing rent.

Landlords / Agents should ensure that the letting agreement (contract) provides for all these reasons for retaining a deposit.

Landlords / Agents should also be aware that damage deposits should not exceed 5 weeks’s rent.

Landlords and agents taking a deposit from an assured shorthold tenancy (AST) tenant must protect it in one of the approved schemes within 30 days of taking it. They are also obliged to serve on the tenant a set of statutory information regarding the scheme in question. This information and documentation (s213 notice) is available for download from the relevant scheme’s website.

Landlords and agents are advised to get proof of service of this documentation on their tenant as failure to comply with any of the TDP rules will invalidate any accelerated possession (s21) claim.

Deposit Disputes and that Crucial Evidence

Most tenancies end amicably and the landlord or agent will agree to either refund the full deposit or an agreement between them and the tenant will be reached, such that all or a part of the deposit is retained to cover the issues mentioned above.

However, it is sometimes not possible to reach agreement and therefore the deposit amount in dispute is put into an arbitration process, which is handled by the DTP scheme in question at no cost to the parties involved. In some cases, where complications arise, the dispute will be transferred to the county court for settlement, in which case fees and costs will be involved, and normally the losing side pays these.

Deposit amounts in dispute will be released from the scheme when the parties agree to this. Otherwise the scheme adjudicators will decide on the evidence presented to them who receives the money.

It is crucial therefore that landlords and agents during the course of letting and managing a tenancy build-up sufficient documentary evidence to enable them win a deposit dispute claim should the need arise: a good inventory (preferably done by an independent inventory clerk) with check-in and check-out reports, including photos and tenants signature, is essential.

Further evidence would include estimates and invoices for repairs and renewals, cleaning and removal costs, rent schedules where there are arrears and statements from third parties / contractors as in the case above. It is not possible to claim for work that landlords do themselves (DIY).

Fair Wear and Tear

The contract between a landlord and a residential tenant has an implied term which means dilapidations to the property due to fair wear and tear are acceptable and cannot be claimed against the deposit.

What is fair wear and tear is a matter of subjective judgement to some extent but is informed by the experience of the landlord, agent or inventory clerk, and when in dispute will be decided by the scheme’s adjudicator.

These requirements contrast with commercial tenancies where the lease usually requires the tenant to put back the property into a tenantable state, which usually means complete redecoration, and can even mean major structural repairs as well.

Fair wear and tear has been defined by the House of Lords as resulting from:
“Reasonable use of the premises by the Tenant and the ordinary operation of natural forces”

This statement is not all that helpful when it comes to the task of deciding what is fair wear and tear and what goes beyond that?

Reaching a decision means making an allowance for:

– The original age, quality and condition of any item at the start of the tenancy
– The average useful lifespan to value ratio (depreciation) of the item
– The reasonable expected life time usage of such an item
– The number and type of occupants in the property
– The length of the tenants’ occupancy

It follows therefore from established legal practice that a landlord cannot charge its tenants the full cost of having any part of a property, or any fixture or fitting, returned to its original condition, or even the condition it was in at the start of the tenancy.

When it is not possible to make repairs, any compensation when a new for old replacement is made will therefore involve an allowance for age, quality and fair wear and tear.

Further, a duty is placed on landlords and agents to adopt the most reasonable, practical and appropriate cost-effective approach to achieving a remedy.

Appropriate remedies might include:

Only replacing items where it is so severely and extensively damaged it is now beyond economic repair or, it has become unusable. Here, the most economic repair would be expected.

Small stains on carpets for example may be put down to fair wear and tear, whereas more extensive mark and staining or burns would not.

However, depending on their position it may be possible to cover them with strategically placed rugs and mats and the adjudicator may insist on that.

Otherwise where a replacement carpet is deemed acceptable, any compensation by the tenant would need to take into account: (1) its appropriateness for use in a rental (e.g. colour), (2) quality, its age and expected lifespan. Therefore in these cases the tenant would be asked for a contribution to the cost, new verses old.

Repairs or Cleaning

What is clean to one person is sometimes downright filthy to another.

Cleaning is the most common cause of a deposit disputes between a tenant and a landlord, with nearly a quarter of all dispute cases being attributed to issues of cleanliness.

Therefore any adjudicator’s decision will depend on the evidence submitted, how reasonable is the amount being claimed, and is the claim supported by a contractor’s statement.

Questions the adjudicator may ask:

– Who says it needs cleaning? Is this opinion independent and impartial, e.g. an inventory clerk or agent?
– Did the tenant agree to condition and cleanliness at the start of the tenancy and was it made aware of potential costs of not complying – e.g., a specific clause in the agreement?
– Was the property professionally or DIY domestically cleaned at the start of the tenancy?
– What evidence have you got that shows deterioration, start to end?

Photo & Video Evidence

Photo and video inventories (ideally produced independently) are useful for recording the condition of the property at the start and end of the tenancy and when done properly will provide a clear record of the property prior to its occupation.

You need to make sure all photographs and video evidence is clearly dated and signed and agreed by both parties. This is much easier to achieve when an independent inventory clerk completes the task.

Always make sure the tenant is given a copy at Check-in/Check-out stage, and get a signature to say they agree and understand all the implications after viewing and discussing.

The end result of adjudication will always hinge on the quality of the paper based documentation presented, so good quality photo evidence, signed by both parties will add considerably to the weight of a landlord’s case.

Preparing a Claim

Preparation for a deposit dispute claim starts pre-tenancy. If you have not planned your management process: agreement wording, quality inventories, check-ins and check-outs, communicating to tenants your expectations, interim inspections if necessary etc., then your chances of successfully claiming against a deposit are pretty low indeed.

Putting together a good claim is time consuming and evidence heavy – the adjudicator can make a decision only on the evidence presented in document form. Furthermore, there is no appeal once the adjudicator makes a decision. You cannot challenge an adjudication decision unless it is via a court of law. The more evidence you can produce and the more transparent you are with the whole process the better your chance of success.

As a landlord or agent you need to weigh the costs of putting forward a good claim against the amount of money involved. It the one outweighs the other it is sometimes better to return the deposit to the tenants and “bite the bullet” as cost of regards reinstatement.

This can sometime be an act of good will and will prevent any chance of retaliatory action by the tenant – it would not be the first time a landlord had a brick through the window of its rental property because the tenant felt hard done by losing its deposit.

To help you prepare your claim properly here are two very useful guides: – Recommended Books

Understanding Fair Wear and Tear by the Association of Independent Inventory Clerks (AIIC)

How To Win Deposit Disputes by Tom Derrett

Article By Tom Entwistle, LandlordZONE®

If you have any questions about any of the issues here, post your question to the LandlordZONE® Forums – these are the busiest Rental Property Forums in the UK – you will have an answer in no time at all.

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