A guide to tenancy deposits

As all Landlords should be aware, in April 2007 it became Law that all Assured Shorthold Tenancy deposits must be protected in a Government...

As all Landlords should be aware, in April 2007 it became Law that all Assured Shorthold Tenancy deposits must be protected in a Government authorised tenancy deposit scheme.

There are three schemes to choose from; the most used probably being the free custodial scheme; the DPS (Deposit Protection Scheme). Whilst it is important to remember the key elements when protecting the deposit, such as making sure it is protected within the set time frames and ensuring tenants are given copies of the Prescribed Information, what is more important is ensuring that you have put the processes in place to ensure that if there is a reason to utilise the deposit at the end of the Tenancy you are able to.

A deposit logged with the DPS cannot be released unless both the landlord/ agent parties agree on the amount that should be repaid. If the amount cannot be agreed you need to be sure you have enough evidence to support your costs. This means precautions have to be put in place before the tenants even move in.

The most important thing to remember about a deposit is that it belongs to the tenant unless it is proven otherwise and therefore it is down to the Landlord/ Agent to prove why any deductions should be made.

If a deposit is disputed, the case will be passed over to the ADR Service (Alternative Dispute Resolution) and relevant evidence will be used by the Adjudicator to assess what percentage of the Deposit will be distributed to which party. It is therefore really important that you know what evidence to send in order to stand the fairest chance of winning the case.

Pre- Dispute

The other reason is that if the tenants do still oppose any charges assigned to them you are aware what their argument will be and will know what evidence to have ready in preparation for a dispute.

I have provided a short breakdown of the types of evidence and how they can be used as supporting evidence.

• Tenancy Agreement
• Inventory
• Dated photos
• Invoices
• Maintenance Log
• Inspection Logs / photos
• Correspondence Log
• Rental Account
• Pre- Move Out Inspection/ Photos
• Move Out Inspection Report
• Move Out Photographs

Tenancy Agreement

The Tenancy Agreement is the most important document on a two-fold level. The Tenancy Agreement is written proof of the Landlords expectations and rules which are legally expected to be followed by a tenant entering the Tenancy and the Tenant’s agreement to abide by those same rules. The Tenancy Agreement sets out the foundation for what the Landlord expects and the consequences for failure to abide by the rules.

The DPS Definition of a deposit is: ‘Any single amount of money paid by the Tenant or a Third Party in relation to a particular Tenancy agreement as security against the performance of the Tenant’s obligations under the Tenancy Agreement, the discharge of any liabilities, any damage to the property and/ or non-payment of rent during the Tenancy.’ Therefore if there is not a clause in the Tenancy Agreement no deposit can be taken for failure to meet that obligation. Equally, if the Tenancy Agreement does not outline what the consequence of failing to meet responsibilities are they cannot add charges or costs from the deposit. In short, if there is not a “breach” the tenant will be refunded the deposit.

Inventory

An Inventory is the best tool to support any costs relating to damages. Taken at the start of the Tenancy and signed by the tenant the Inventory proves the condition of both the property and its contents in specific detail at the start.

NGU Homelettings complete the inventory in the presence of the Tenant to ensure that both the item/ condition grading is agreed as well as any specific points. The inventory should be dated and carried out no later than the Move In date, to ensure it is as accurate as possible. This also proves to the potential DPS Adjudicator that we provided sufficient support and opportunity for the tenant to add any existing damages at the start of the tenancy.

When the tenant leaves the Inventory can be cross-referenced against the final condition of the property to provide an infallible comparison of ‘before’ and ‘after’.

Dated Photos

Dated photos compliment and visualise all documented evidence, from the Inventory throughout periodic inspections of the property, to monitor specific maintenance issues work or upgrades to the property and finally to verify the property condition at the Move Out. NGU Homelettings always ensure that the camera we use displays the date/ time the pictures were taken.

It is important to take photographs inside cupboards, of walls, carpets, floors, the outside space (if applicable), working light bulbs, sinks, behind toilets, doorframes, plug sockets etc. areas that tenants often forget or don’t realise they have to clean when moving out. The highest percentage of deposit deductions (38%) are made for insufficient cleaning. So ensuring you have pictures of the ‘typically’ missed areas can prove that they were clean to start with.

Invoices

It can be useful to include invoices from both before, during and after the Tenancy. Invoices proving work was completed prior to the Tenants moving in can eradicate any doubt for example of the age of a carpet or how quickly you reacted to a maintenance issue they reported etc.

They are also used by the Adjudicator to prove the cost of the work you are asking the Tenant to pay for out of their bond. Therefore itemised Invoices can clearly demonstrate justification for the cost you are asking for. Of course if the work is not completed in time to supply the DPS then written Quotations can be substituted to provide an indication of price and if provided by the same Tradesmen/ Contractors carrying out the work but these will not be given the same weight as actual Invoices.

Maintenance Log

This can be used to provide proof of how quickly work was completed during the tenancy, what work was done and can also prove whether the tenants failed to report maintenance. For example a leak left unreported could cause far more damage which potentially could be the tenants fault for being negligent.

This is especially useful if the tenant is disputing the bond based on failure from the Landlord/ Agent to fulfil their duties and obligations in respect maintenance being completed within suitable timescales. Tenants often do this when trying to deflect attention from costs which they are liable for by trying to claim the Landlord/ Agent breached the Tenancy Agreement.

However; dates; proof of communication; Estimates; Reports and Invoices are a concrete method of demonstrating that Landlord obligations were taken seriously and performed in line with regulations and thus can re-vert attention back to the significant point: what you are charging the tenant(s) for.

Inspection Logs/ Photos

Inspection Logs are excellent back up when supplying evidence for most issues. They log in detail a running commentary of the property condition, any issues the tenant has raised and had fixed and how the tenant has kept the property. Combined with pictures; Inspection Logs are a continuing timeline of the property and tenancy history; this is especially helpful in proving damage that has been caused over a period of time; for example Condensation caused by the tenant not ventilating the property, hanging clothes on the radiators etc.

Correspondence Log

Any correspondence relating to the issue in question should be provided; whether it is between contractors, the tenants, the guarantor or any other relevant party, as this can show the tone and intentions of the parties involved.

Rental Account

Rent arrears can only be proven by providing a complete Rental Statement. The statement should clearly show the rent amount due and the rent paid with corresponding dates. It is also useful to include any pre-tenancy fees such as Admin/ Deposit/ Credit Check etc. The reason for this being that the DPS Adjudicator will calculate how much should have been paid in full and then cross reference this against the amount the tenant has paid.

Therefore if Pre-Tenancy Fees are not included in this total figure the decision could fall into the tenants favour as it may seem they have paid all monies due. Any Late Fees or Charges incurred throughout the Tenancy should also be made clear. The Office of Fair Trading’s Unfair Contract Terms Act 1977 is taken into consideration when linking charges to the clause in the tenancy that it relates to; if the clause is deemed ‘unfair’ then the Adjudicator may dismiss the charge as unreasonable.

It is useful to provide proof that the rent arrears/ charges have been brought to the tenant’s attention by supplying proof of any communication between Landlord and Tenant. It is also worthwhile explaining in a concise manner why charges have been applied and what loss the Landlord/ Agent suffered causing the charge to be added.

Pre-Move Out Inspection / Photos

NGU Homelettings carry out a ‘First Meet Inspection’ with all tenants once they have handed in their Notice. This appointment is key to solving Deposit dispute before they happen. In addition to our Review Inspections this appointment is treated similarly to a Final Move Out. We remind the tenants of their responsibilities as outlined in the Tenancy Agreement and draw attention to the condition of the property as listed in the Inventory. Condition that deviates from these points of reference are listed to the tenant both verbally and in writing and they are told the approximate costs of reinstating these issues.

The tenant then has until the date they move out to rectify any issues and know what the financial implications of them failing to carry out these instructions will be. The majority of tenants appreciate this forewarning and advice and respond favourably to it. In cases where they don’t; they are less likely to object as they know deductions are being made as a result of their failure to heed advice.

Evidence of this forewarning can also be provided to the DPS to show the Landlord/ Agents due diligence; which is favoured when Adjudicators make a decision on entitlement.

Move Out inspection report/ Move Out Photographs

The Move Out documentation should include a final report on the property condition. NGU Homelettings complete a 792 Point Checklist; which includes everything from cleanliness, whether light bulbs are working and an exterior visual check which involves checking whether drains and gutters are clear as well as whether all refuge has been removed. We also take comprehensive photographs of all areas inside and out of the property that match with the original Inventory photographs.

This allows a fair and precise methodology of comparing condition and completes the timeline of records for the full Tenancy; meaning that when referred to in a deposit you can rest assured the evidence you need, will support your argument.

The evidence sent over should always relate specifically to the cost of the damage / rent arrears that you are wanting to deduct. However any issues or counterargument listed by the tenant should also be addressed whether you consider it relevant to the charge or not; as failure to acknowledge these statements could result in the decision being waived unfavourably against you if tenants points are considered relevant by the adjudicator.

Yours

Chris Fitzakerley