Tenancy Deposits an arbitrators view

What is an arbitration in relation to a disputed tenancy deposit?  We explore how an arbitrator looks at a disputed tenancy deposit between a landlord and tenant and some tips on the issues in resolving tenancy deposit disputes.

Landlords that let property and take a tenancy deposit should be aware that where they take a tenancy deposit they will also need to use one of the Government’s approved Tenancy Deposit Schemes (TDS).

A landlord can use either a custodial or insurance based scheme.

To find out which Tenancy Deposit Scheme to use then have a look at our recent article Tenancy Deposit Scheme, which scheme?

Paying over the tenancy deposit is not generally a problem for landlords. The schemes are generally pretty landlord friendly.

Repaying the tenancy deposit.

The problems come for a landlord when the tenancy ends, and the landlord needs to repay the tenant’s deposit and the tenant disputes the landlord trying to withold part of the tenants deposit.  This is when tenancy deposit disputes begin between landlord and tenant.

Both TDS schemes have set procedures on how to repay the tenant’s deposit.

it gets difficult when the tenant and landlord disagree on how much if any should be withheld from the tenancy, and how much of the deposit should be repaid.

Frequently, the issues that tenants and landlords disagree on relate to cleanliness and ‘fair wear and tear‘.

These frustrations over the potential for tenancy deposit disputes and long running and protracted dealings with the tenant over the return of their deposits has caused many landlords not to bother taking a deposit at all.

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Those landlords who want security against damage against their rental property but want to sidestep the vagaries of the TDS should look at this strategy of using a guarantor and charging an administration fee but also being aware of the new constraints on letting fees resulting in many subsequent letting fees being made illegal.

However, whilst this may work with some tenant groups, such as student tenants and tenants in relatively poor financial situations; the acceptability of getting a company director, high court judge or doctor to get their parents to be a guarantor is more problematic. Therefore many landlords are forced to deal with the constraints of the Tenancy Deposit Scheme and the necessary adherence to the legislation.

Where disputes arise at the end of the tenancy, the Tenancy Deposit Scheme has introduced a system of arbitration as an alternative to the case going straight to court.

The arbitration route can only be used where both the landlord and tenant agree. The arbitrator is employed to impartially apply the rules of the Tenancy Deposit Scheme and settle any dispute between the landlord and the tenant without the need to go to court.

What does an arbitrator look for?

We have managed to gain some useful inside view into how the arbitration system works and more importantly the view through the eyes of one of the arbitrators that works within the service. It provides an insight into why so many landlords lose dispute cases when attempting to make legitimate deductions from a tenant’s deposit.  For more details on what an arbitrator looks for have a look at our series of advice from a former Tenancy Dispute arbitrator Tom Derrett.

Starting point for the TDS and the arbitrator

One of the fundamental aspects that a landlord should understand and a starting point for any adjudicator is that the deposit is not the landlords and actually belongs to the tenant. This means that in the eyes of the TDS the landlord must prove to the adjudicator or the court should it go that far that any deductions they may want to make from the tenants deposit is justified.

Proving the case for a deduction as Barry Brunton a trained adjudicator admits is not always easy. A landlord should realise that it is not their role either to chase the landlord for supporting information to prove their case. The adjudicator having made an initial request for information will simply decide on what they have before them. As an adjudicator recently wrote:

“It is not for me to go looking for evidence and I do not do so. It is for the party bringing the dispute to support their allegations.”

The top and bottom of it is that a landlord making a claim will need a ‘tenant check in’ statement and a detailed record of the ‘check out.’

It is not enough, just to have an property inventory with a list of items and contents. The inventory should be accompanied with detailed condition report of the property at the start and finish of the tenancy signed and agreed by both the landlord and tenant.

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Photos are not the answer

Interesting Barry confirms what Property Hawk has being saying for some time. Those landlords with a digital camera who think that the creation of a photo montage of their buy-to-let property but no written evidence will be enough to sway the courts or the arbitrator into agreeing with their side of the argument are mistaken.

Photographs on there own are of little use. As an adjudicator wrote in a recent dispute, “Photographs can be of any property at any time, and dates on photographs can easily be changed.”

The only sure fire way of making photos acceptable as evidence, is if each is signed and dated by the tenant as part of the schedule of condition and check in statement. Even then photos are not always conclusive on degrees of damage or cleanliness.

‘Fair wear and tear’

What is fair wear and tear? A classic dispute that often arises is the condition of a floor or carpet. A landlord that buys a new carpet thinking that it should be good for 10 years as is the case with their own home often finds after a years tenancy, the carpet is soiled and warn.

Firstly, landlords need to be sensible about what floor covering they use. Most tenants will not treat a rental property with the same forethought as if it was their own. That’s just a fact of life and landlords need to ensure that the type of flooring used reflects this. For example, laminate flooring in high wear areas. When carpet is used, unless the property is high spec; it maybe better to use cheaper carpet that you anticipate changing every 3 years rather than more expensive carpet that would normally last 10 years.

Having said all that; an adjudicator will only be interested in the condition of the carpet at the start of the tenancy. Evidence is critical, such as: when the carpet was purchased, the cost of replacing the carpet, the normal life of the carpet. The adjudicator will consider whether any soiled carpet could have been cleaned before deciding on whether it should be replaced.

The adjudicator in their award on the costs of a replacement carpet but not the underlay will consider ‘wear and tear’ and betterment.

For instance, in the case of a 3 year old carpet Barry Brunton reveals that the landlord would be lucky to receive 40% of the replacement cost even if the landlord could provide all the evidence required.

Ignorance is a defence!

Interestingly Barry reveals that ignorance as far as the tenant is concerned may be an acceptable defence. This means that when a tenant breaks the washing machine because they have been turning the dial the wrong way, could have a case. The onus on the landlord is therefore, to provide the tenant with the instructions on how to use the equipment. However, even providing a tenant manual may provide no guarantee for the landlord.

Barry recounts the case where a tenant who ruined a lawnmower by not putting in oil before use argued successfully that there was not ‘put oil in mover’ sign on the mower, even though the tenant had been provided with a manual which clearly had said ‘check oil before use’.

One way to ensure that tenants do not use this excuse may be to get a tenant to sign a tenant manual that states they have read any instructions given to them as part of the ‘check in’.

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Non payment of rent

One of the biggest claims made by landlords in respect of the tenancy deposit is for non payment of rent.

Many tenants do not pay the last months rent, considering that they have already done so in proxy through their tenancy deposit.

Non payment of rent should be relatively easy to evidence for a landlord or letting agent. Again it is down to them to prove the rent has not being paid by submitting a rent account or and bank statement showing what rent has been paid. This is required even if the tenant submits no evidence to the contrary.

Barry points out to landlords that in respect of the TDS tenants do not need to give notice if they leave at the end of a fixed term tenancy.

He highlighted the case where a tenant contacted a landlord on 1st of March that he intended to stay on when the fixed term tenancy expired on the 31st March. Then the tenant changed their mind and left on 31st without informing the landlord who only new when the keys were posted back through his letterbox.

The adjudicator concluded that the tenancy was a fixed term tenancy ending on the 31st March and that the landlord was not therefore entitled to notice.

Barry’s perspective gives an interesting insight into the brief and outlook of the adjudicators in this process.

Landlords are no longer ‘god’ when it comes to tenancy deposits

From a landlord’s point of view it is also clear that the deposit is very much the tenants deposit and any deductions from it will have to be hard won and thoroughly evidenced so have a look at the Tenancy Deposit Masterclass.

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