Agony Aunt: How do I deal with a dispute over the deposit?

Each week, we answer a reader’s question about renting their properties – from first-time landlords needing pointers about contracts to experienced owners with technical queries. Aunt Agatha, Rentify’s agony aunt, is here to help!

Q: How do I deal with a dispute over the tenant’s deposit?
A: Last week we covered how to ensure a smooth check-out at the end of a tenancy, including ensuring a thorough inventory at the start to mitigate any issues, but what happens if there’s a dispute with the deposit? Deposit Protection Schemes (DPS) and the procedure of returning or keeping the money are in the hands of a third party – the Alternative Dispute Resolution (ADR) service. Here are a few things to keep in mind:

  • The deposit belongs to the tenant until decided otherwise
    The deposit is automatically the tenant’s. This means that you cannot make personal use of it throughout the tenancy, even if it’s in an insurance-based scheme, and especially not to jet off to the Bahamas. If a dispute arises, you must put the disputed amount into the scheme in the allotted time frame you are given by the administrator.
  • Proving a case is the landlord’s responsibility
    If there is a dispute, the burden of proof rests on the landlord because it is the tenant’s money. This is why an in-depth inventory should always be taken before the tenant moves in. A spreadsheet and a quality digital camera are your best friends in this regard.
  • Avoid the dispute in the first place
    Arguing over deposit money often means going round in circles, particularly if the proper preliminary measures haven’t been taken. These include a well-planned tenancy agreement, a list of reasonable tenant instructions and a detailed inventory. The inventory is the most important document you can have when involved in a deposit dispute. If it is thorough, contains clear photographs and has been signed and dated by both parties then it will be able to prove whether or not the tenant has damaged something. If you can convince your tenant that they don’t have a leg to stand on (in the nicest way possible!), you may well avoid the extra hassle of the ADR. Also remember that a landlord can’t claim for fair wear and tear – a deposit is not a general maintenance fund to spruce things up between tenancies – so try to be reasonably forgiving if it’s a borderline issue.
  • Check out together
    Before the tenant has left the property, go through the inventory with them and discuss your thoughts as you go. It’s best to do this after they have packed up their belongings so that you get a clear view of the property. Explain the check-out process to your tenant a few weeks in advance so that they get a chance to clean the property and repair or replace anything they have damaged.
  • Keep records
    Communicate clearly with your tenant about the deposit and try to come to an agreement before going further. If this is the case, try to do it by email so that you have proof of your interactions. Make notes of phone conversations. This will come in handy if the dispute makes it to the ADR. And, as well as the inventory, you’ll need any relevant invoices, receipts and quotes for repairs and/or replacements, bank statements, and bills.
  • Dealing with a formal dispute
    If you and your tenant are at odds over deposit money, your DPS provider will arrange an ADR. The precise details of the procedure will vary according to your particular scheme but there are some general rules. Neither party is required to meet with the adjudicator, nor will the adjudicator visit the property. The process is purely evidence-based. Before an ADR can go ahead, it requires both parties’ consent. Consequently, the decision is binding, although it can be challenged in the Courts: always seek legal advice before proceeding with this final step.