6 ways to avoid deposit disputes

Managing disputes over tenant deposit monies, caught in the middle of an often petty squabble between an unhappy landlord and an equally aggrieved tenant, can be a prolonged administration nightmare, and the length of time involved can be completely disproportionate to the deposit involved. The majority of such disputes fall into two categories – (1) cleaning and (2) fair wear and tear. With a little careful planning at the outset, supported by a small amount of ongoing management effort, many disputes can be avoided in the first place. A quick read through the tips below could save you hours if not days of deposit dispute difficulties.

1. Remain impartial

First of all, it’s important to remember that this is the tenant’s money we’re talking about, and through all the legal jargon and regulatory guidelines the default position is that the money belongs to the tenant unless it can be proven by an independent adjudicator that the landlord has reasonable claim over some or all of it. As an agent it is also important to remain impartial, as you may well have client relationships with both parties involved, and disputes can often see petty disagreements snowball and threaten to drag everyone involved into the quagmire. Ask the tenant to seriously consider how they might feel if it was their property being vacated by a stranger, and similarly ask a disgruntled landlord how they might feel as a tenant if their money was being withheld for the reason they are proposing. Common sense still exists and is often the simplest solution.

2. Have a sound tenancy agreement in place

Since a deposit dispute can very quickly escalated into a legal procedure, it will ultimately be underpinned by the legal tenancy agreement or AST between the landlord and tenant. As a managing property agent providing the agreement is an important role so ensure the agreement is as tight and fair as possible, and make sure that both parties actually read and “agree” to what they are signing. Ensure that the landlord is familiar with what is fair and reasonable, and as the tenancy nears its end remind the tenant with what their obligations are. It could be several years since they moved in and they will likely comply with what is expected if this is routinely explained while relations are still unsullied by any disputes. It’s worth considering that a tenancy agreement must be fair also, and even if it has been signed an independent tribunal judge will quickly reject any unreasonable clauses when it comes before them.

3. Dispute claims should be sensible and focussed

A tenant’s deposit is typically equivalent to a month’s rent, and many disputes revolve around only a proportion of this amount. If the deposit is covered by an insured scheme, then get the undisputed portion of the deposit returned to the tenant as soon as possible, and if it’s in a custodial scheme then apply to that scheme to get that element released also. The landlord will have no justifiable reason for retaining the whole amount, and the tenant will be happier that they have got something back. This often takes the heat out of the argument and may pave the way to more sensible discussions to resolve the actual problems at hand. There is also a tendency for one disputed item to transform into five or six grievances when tensions rise.

4. Gather reliable evidence throughout

Life is full of disputes, foreseen and unforeseen, but those involving tenant deposits are predictable and should be planned for from the outset. A check-in process involving a full inventory backed by relevant photos, regular property inspections during a tenancy, and a check-out process with both landlord and tenant involved will ensure you have the necessary photographic evidence and documentation to bring to the table when allegations arise about the initial state of the property and its furnishings. Remember though that if a dispute does occur only evidence which is directly relevant should be submitted. If the photo doesn’t clearly support the argument, then leave it out. It’s a good rule of thumb throughout your management activities to envisage a potential legal dispute at the end and this will help you collate the relevant material in advance, although it will hopefully never be needed.

5. Keep a track of correspondence

When communications break down during a dispute you may need to prove impartially that certain conversations have taken place. Keep records of all correspondence between your agency and the various parties. This job will be made much easier through the use of property management software such as RentPro where letters, text messages, emails and phone calls can all be recorded and printed off as evidence if required. If the dispute relates to rent arrears it will be important to show that appropriate efforts were made to make the tenant aware of these arrears and to bring the arrears under control prior to the issue escalating.

5. Be clear on what is fair wear and tear

The majority of claims relate to minor damage which is subject to what the various parties consider fair wear and tear (FWT). The House of Lords defines FWT as “reasonable use of the premises by the tenant and the ordinary operation of natural forces”. Landlords often try to seek compensation for scuff marks on walls and furnishings but these are most certainly unavoidable, whereas broken chair legs or burn marks on tables may well be evidence of neglect of tenant responsibility. A landlord should expect the property to be vacated in roughly the same state as it was entered, not cleaner. Obviously comprehensive photos are going to be the best evidence and these should be collected during the original inventory and any subsequent inspections, and recorded in a reliable property management system such as RentPro. Remember that even if a dispute is successfully settled in the landlord’s favour under the terms of betterment a judgement does not offer new for old, and the landlord may receive less than they expect for damages. As the property agent experienced in these matters, it’s important to manage the expectations of both parties from the outset and advocate common sense and mutual respect by all.

6. Have the conversation before the tenancy ends

A calm, adult conversion can go a long way to resolving lots of disputes before they ever arise. Most people are not unreasonable, but once an argument kicks off they will firmly plant their feet in the ground and become entrenched in their position, unnecessarily complicating the smallest of disagreements. When communications break down resolution will likely involve third-party intervention which can take a lot of time and effort and invariably breaks relationships for good. When a tenancy is nearing its end as the managing agent talk to both parties and set their expectations, convene a checkout process and tackle any potentially thorny issues before they arise. Some agents may offer a cleaning service which can quickly rectify problems with the state of the property, allowing both the landlord and tenant a quick and acceptable solution without having to resort to dispute procedures.

Three things are certain in this life – death, taxes and disputes over tenant deposits. With a little foresight and planning, backed by good property management skills you can take the pain out of the latter. A dedicated and comprehensive property management system such as RentPro will help you manage the state of the property, and the associated records, and leave you in a much better position to fulfil your professional duties to all concerned.

If you’re a new or established agency looking for property management software to help get your business more organised and efficient then why not try RentPro’s 14-day no-obligation, fully functional trial to see how it can bring things under control?

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