To handle tenancy deposits legally, landlords must protect deposits via a government-approved scheme; disputes can be avoided through clear communication between landlord and tenant and strong tenancy agreements.
Protecting tenancy deposits is a quick and simple step but, if avoided, can land landlords with serious financial and legal problems.
At J Property Management London, we help landlords handle their legal obligations, stay compliant and get the best out of their property investment. Get in touch today to see how we can help you with your tenancy deposits and other landlord responsibilities.
How Should Tenancy Deposits Be Handled Legally?
Landlords have a responsibility to correctly handle tenancy deposits by putting them in a government-approved scheme and holding them there until the end of the tenancy. Before the schemes were introduced, tenants had a hard time getting their deposit back.
In England and Wales, there are around 4.7 million tenancy deposits protected (TDS Statistics), nearly over half of which are in free schemes.
Protecting tenancy deposits via a scheme is not only a legal obligation for landlords but can also protect them from costly tenancy disputes. Clear communication, strong tenancy agreements and documenting everything can also help avoid any disputes and legal action.
What Are A Landlord’s Legal Responsibilities For Tenancy Deposits?
Once the tenant has paid their deposit, landlords or letting agents must use either a custodial (free) scheme or an insured tenancy deposit scheme to protect the deposit for the duration of the tenancy.
They also must provide tenants information about what scheme has been chosen and how the tenancy deposit will be managed. This should also include information about how tenants can apply to get the deposit back at the end of the tenancy and what they should do in the event of a tenancy deposit.
What Legal Action Can Be Taken If Landlords Don’t Protect Tenancy Deposits?
If landlords fail to protect the tenancy deposit in a government-approved scheme or provide tenants with the required information, tenants could apply to the county court to request an order for the deposit to be repaid.
Depending on the exact case, landlords may also be required to pay compensation equivalent to up to three times the value of the tenant’s deposit. This compensation must be paid within 14 days of the court order.
There may also be restrictions put on landlords regarding eviction rights, taking away the ability to evict the tenants by giving a minimum of two months’ notice.
Before taking legal action, tenants should always contact the landlord first and give them the chance to put the deposit in a tenancy deposit scheme or pay the deposit back.
What Happens If There’s A Tenancy Dispute?
Tenancy disputes can occur if the landlord or tenant disagree about the returning all or some of the deposit after the tenancy is over.
Landlords should only ever be entitled to hold on to some or all of the deposit if they can demonstrate financial loss as a result of tenant actions e.g. property damage or outstanding payments. They should be able to show a cost breakdown for this and justify any money that is being taken out of the deposit. It should be noted that normal wear and tear doesn’t count when justifying keeping tenant deposits.
If there are disputes, tenants can use a free service offered by the tenancy deposit protection scheme to help resolve them and provide advice about what to do. The service requires both landlord and tenant to provide evidence about the case and will make a final decision about the tenancy deposit.
Tenancy disputes can be avoided with clear communication between tenant and landlord, laying out the terms and conditions of the tenancy in the tenancy agreement and ensuring that the deposit is legally handled in a government-approved scheme.
What Are The Most Common Tenancy Disputes?
Generally speaking, since the introduction of the tenancy deposit protection schemes, tenancy disputes are fairly infrequent. However, certain tenancy disputes are the most common.
These include disputes about:
- Cleaning
- Property damage
- Redecorating
- Gardening
- Outstanding rent payments.
How To Avoid Tenancy Deposit Disputes
Use A Government Scheme
The government-approved tenancy deposit protection schemes are there for a reason. They keep tenants’ money safe during the tenancy and keep landlords protected from legal action. These schemes make the risk of any tenancy disputes significantly lower.
Find Good Tenants
Avoiding tenancy disputes starts with good tenant sourcing. Taking the time to select good tenants for your property can make a big difference. This includes meeting tenants before, thorough tenant screening and references and credit checks. You may also want to ask for a guarantor to cover yourself in case of emergencies. Having trustworthy tenants will make good communication easier and reduce the risk of property damage or other causes of tenancy disputes.
Tenancy Agreement
Write a watertight tenancy agreement that clearly lays out the roles and responsibilities of both the tenant and landlord. This ensures that everyone is on the same page from the outset. Having it in writing means that it can be used at a reference throughout the tenancy. Landlords should also check that tenants understand the agreement before they sign it.
Fair Landlord Practices
Landlords have a legal obligation to provide a safe and habitable environment for tenants. If landlords are legally obliged to do something, they must adhere to that. For example, if the tenancy agreement states that the landlord is responsible for cleaning the gutters or dealing with mould, they must do that. Additionally, tenancy deposits should be returned unless landlords can demonstrate outstanding payments or property damage beyond normal wear and tear.
Get Everything In Writing
Documenting everything – such as detailed inventories at the start and end of tenancies – can help avoid disputes and ensure that there is evidence of the property’s condition before and after the tenancy.
Avoid Tenant Disputes With J Property Management
At J Property Management, we help UK landlords stay totally compliant and avoid disputes, legal action or unexpected financial hits.
From sourcing trustworthy tenants and drawing up strong tenancy agreements to professional property maintenance and ensuring full compliance, we help protect you from tenancy disputes.
Contact us today to see how we can help you with landlord legal responsibilities and more!
