publication date: Jan 20, 2011
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books
Tenancy Deposit Disputes
Love it or hate it, the need to protect tenants' deposits is here to stay and if you don't protect tenants' deposits, as a landlord, then you are likely to find it difficult to evict a tenant that's not paying the rent and you are likely to be breaking the law too!
There are two types of schemes that you can join. Some are more suited to self managing landlords, others targeted more at landlords' agents.
- The Custodial Scheme
This is typically the one taken up by self managing landlords and some agents. It is free to use as the company makes their money by securing a return on the deposits that have been paid and kept by the company until they need to be released.
Link to: The Deposit Protection Service (DPS)
- Insurance-based Scheme
This is where you can keep the deposit, but the company you work with effectively insures the deposit on the tenants and landlords/agents' behalf. In this instance, the tenant pays the deposit to the landlord or agent, and they pay the company to insure the deposit should they not be able to pay it back for any reason.
Link to: My Deposits (formerly the Tenancy Deposit Solutions Ltd) and the Tenancy Deposit Scheme (TDS).
It is worth noting that the TDS went through some tricky times recently and in some cases, despite low numbers of disputes, they are reported to have increased premiums by up to 1000%! Read more.
The key to making sure the deposit schemes work for landlords, agents and tenants is to avoid a dispute in the first place. The DPS offer the following excellent advice:-
- Ensure thorough check-in and check-out reports are conducted
Both landlord and tenant should be present when these reports are completed in order to sign the documents. This proves that both parties agree on the quality of the property and its contents before and after the tenancy.
- Take photographs
Photographs provide physical evidence of the quality of the property. Make sure they are signed and dated by both parties and included with the check-in and check-out reports.
- Provide vacating instructions
Vacating instructions will set out clearly how a tenant should leave the property at the end of the tenancy and avoid confusion.
- Get it in writing
Ensure that all communication between the landlord and tenant is in writing, this can be saved and provided as evidence should a dispute arise.
If at the end of the tenancy a deposit is disputed, it's vital that each party can produce as much evidence as possible to support their claim, this should include:-
- A signed and dated Tenancy Agreement - without this it is impossible for a claim to be adjudicated
- The signed and dated check-in and check-out reports
- A collection of signed and dated photographs
- All correspondence relating to the claim
- Each invoice that relates to the claim
The DPS has recently produced the ‘Essential Guide to Dispute Resolution'; a comprehensive guide for landlords and letting agents which provides information on how the Alternative Dispute Resolution (ADR) process is managed, including how claims are assessed and details of the evidence that should be provided to support a claim.
They have also created a guide for tenants that takes them through the various stages of The DPS and highlights their responsibilities, as well as those of the landlord.
Both of these guides can be found on The DPS website, www.depositprotection.com.
Our thanks go to the DPS for their help in highlighting these issues.