Renting a property comes with its legal obligations and rights for both tenants and landlords. And one of those is securing the mutual tenancy agreement by monetary payment, made in advance by the tenant and called a tenancy deposit.
This “front money” is generally considered as protection of the lessor’s rights, with respect to safeguarding their interests. The deposit aims to ensure the intact and rentable condition of the property upon the end of the tenancy, as well as to secure the retrieval of any unpaid rent or expenditures on outstanding utility bills and taxes.
So, this article will help both renters and property owners understand deposit deductions and everything related to their rights and responsibilities when the agreement comes to an end.
Tenancy Deposit Protection in the UK – What is it?
Since April 2006, landlords have been legally bound to put their tenants’ deposit into one of the three tenancy deposit protection schemes (TDPs), which are backed by the government in the UK. Upon termination of the rental agreement, the lessee has the right to get their deposit (or part of it) back, as long as they’ve fulfilled all the requirements, stipulated as pre-agreed terms in their rental contract. The main protection schemes, available in England and Wales, are MyDeposits, Deposit Protection Service and Tenancy Deposit Scheme. There are others, of course, which we do not recommend to resort to, as they do not offer the same degree of protection.
It is important to note here that the tenant is sufficiently protected against the landlord’s potential failure to use any of the approved deposit protection agencies, mentioned above. The renter can easily seek their rights in court and not only get their deposit in full but also receive up to three times the amount that they have initially paid.
The types of schemes, the letting party can choose from, are as follows:
Custodial TDP scheme
We would say that this is the more popular option among landlords, not only because it is free of charge but also because the scheme is open to anyone renting out a property. The scheme operator keeps the deposit in a bank account, which cannot be accessed by either the landlord or the tenant. The money is released to the appropriate party at the end of the tenancy, in accordance with the lessor’s and lessee’s instructions, providing all disputes (if any) have been settled.
Insurance TDP scheme
Unlike the Custodial TDS (Tenancy Deposit Scheme), the Insurance TDS is available only to landlords, who are members of an approved professional body, say, a trade association. The protection scheme allows the landlord to keep the deposit, as long as they pay an insurance fee to the scheme operator, which will guarantee the fair allocation of the money at the end of the rental agreement. This may also involve the protection agency to pursue the landlord for the money if they do not act accordingly.
What else you need to know about TDP
It is worth understanding that TDP is only applicable to monetary deposit payments. This means that if your landlord agrees to secure the rental agreement and their property by accepting an expensive item, (a piece of jewellery, a vehicle) as a deposit, those cannot be protected by a scheme.
In addition, there is no legal requirement for the landlord to produce an inventory, in order to use a Tenancy Deposit Protection Schemes. Still, the two rental agreement parties should draw one up, which they can use as sure evidence in a potential deposit dispute at a later date if necessary.
At the start of the tenancy
Before you enter into a rental agreement, whether you are a landlord or a prospective tenant, we strongly advise that you familiarise yourself with the new Tenant Fees Act, which came into force on the 1st June 2019. You can read more about the new changes on Deposit Cap and the Tenant Fee Ban here and here, plus get a full list of all the important new changes that UK landlords need to be aware of for the 2019-2020 tax year here. When in rule, changes in the law not only ensure fee reductions, payable by the tenant, but also prohibits landlords of unfair deposit deductions, such as uncapped payments for lost keys, for example.
Information landlords in the UK must give to their tenants
By law, your landlord must place your deposit into a protection scheme and notify you within 30 days of the following:
- The address of the rented property and the contact details of the landlord or letting agent;
- Information on how your deposit is protected, the contact details of the protection scheme agency and the relevant dispute resolution service;
- A detailed explanation about the purpose of the deposit (specifying clearly its amount), or in other words, the possible reasons for the landlord withholding your deposit or some of it at the end of the tenancy;
- The steps to follow to get your deposit back and what to do in the case of not being able to get ahold of your landlord;
- Information on what to do if there is a dispute over the deposit.
At the end of your tenancy
Good news. You don’t need to wonder about how long it takes to get your deposit back from the landlord, providing:
- You have not breached any obligations under the tenancy agreement.
- You have not fallen into arrears with the rent.
- You have paid all your utility bills and taxes.
- You have not caused any damage to the property.
Your landlord is legally bound to return your deposit in full or partially (if some of the above are not applicable to you) within 10 days of both of you coming to an agreement on the sum.
If an agreement has not been made and a dispute is in view, then, the deposit will stay under the protection of the chosen TDP scheme until the matter has been resolved.
When Your Landlord Can Deduct From the Security Deposit
What your landlord can deduct from your deposit in the UK is related to whether your breach of the rental agreement has caused them a financial loss. You must be presented with clear (often photographic) evidence of a damaged or missing item, for instance, in order to agree to their claim for reasonable deductions from your tenancy deposit. This is where an inventory record naturally helps.
Your landlord has the right to withhold all or some of your deposit for:
You should agree without question to the landlord using part of your deposit to cover your last utility bills if they haven’t been transferred in your name at the start of the tenancy. If this was not the case, then, it’s your obligation to notify the utility companies of your new address so that the bills can be forwarded to you. Failure to do so, again, can result in the fair withholding of money from your security deposit. Don’t forget to keep a proof of the final meter readings before you vacate the property, as well.
Should you fail to pay your last month’s rent, then, don’t expect to get your deposit in full. Your landlord can keep your deposit for unpaid rent.
Of course, if you’ve made pre-agreed expenditures on improvements to the property against the rental cost, then, keep all the evidence to prove an unfair deposit deduction in a potential dispute.
Your landlord has the right to use your deposit if they have suffered losses due to dilapidations, which have been caused by your inaction to maintain the property in the same state you found it at the beginning of the tenancy. We should point out here that many disputes arise, based on the ambiguous understanding of what normal wear and tear is. Reasonable wear and tear, such as worn carpets and curtains or faded wall paint, cannot be deemed dilapidations.
Outright damage to the landlord’s property, however, such as broken items, due to negligence, or misplaced and missing items, will, of course, land you with sure deductions from your deposit. According to London Fantastic Removals, landlords book a visit right after men with vans clear up a property to inspect of condition and collateral damage. Still, the landlord can withhold an amount of money that does not exceed the value of the damaged piece.
How much a landlord can charge for cleaning the property after you have left is debatable. But one thing is for sure, you need to hand back the keys to a place that is, again, in the same clean state as when you moved in. If not, the property owner can withhold some of your deposit for cleaning their house or flat.
Changes to the property
You should only make significant alterations to the interior and exterior of the property after your landlord’s written approval. Those could be even agreed as being improvements that you can put against your rental cost, such as repainting the walls in trendy colours.
As any changes without consent can be deemed as losses by the landlord, simply because they feel they don’t like them, you better ensure that the property looks exactly how it was before you move out, unless you are not bothered about losing some or all of your deposit.
The outdoor spaces of your rental property are part of it, too. So, it is your obligation to maintain them in a presentable state. More importantly, you should note that you can’t claim any money against your rental costs if you make significant improvements to the garden, for instance, unless agreed in advance by your landlord.
Furthermore, it’s your responsibility to invest in equipment to keep the outside green space in the same condition as it was when you signed the tenancy agreement.
Challenging Deductions – What You Need to Know
Tenants are, of course, concerned about how long it takes a TDP agency to return the deposit in the case of a dispute. It usually takes no less than one month for a decision to be made but it could be longer.
To challenge any deductions made from your deposit, you should follow the steps below:
- Get in touch with your landlord in writing. You should give clear reasoning for your disagreement. If you can, obtain a proof of receipt of your letter.
- File a dispute with your Tenancy Deposit Protection Scheme. You should present them with every possible evidence of why you don’t agree with any deductions that have been withheld from your deposit. You have 3 months to do this from the last day of your tenancy.
- Seek your rights through the courts. It can be a costly and time-consuming process but sometimes, this is your only option if your landlord refuses to use the scheme’s dispute resolution service or your deposit was never protected in the first place.
With the new Tenant Fees Act, both renters and landlords can feel that a fair solution has been implemented to protect their rights. Still, both parties should use common sense and reasonable actions to ensure that they fulfil their responsibilities and exercise those rights within other existing legislation, as well, when entering into and exiting a tenancy agreement.