Home » What deductions can landlords take from tenants’ deposits?

What deductions can landlords take from tenants’ deposits?

woman calculating how much deposit to hand back to the tenant

At the end of the tenancy, the question of how much of the deposit the landlord should return. The best result is one where the tenant leaves the property in a good and clean condition, and the landlord returns the full deposit, without any deductions. This is good for the renter, and good for the landlord, as they’ll be able to turn the property around quickly for the next tenant. A win-win.

However, things aren’t always this easy, and a landlord will need to use their judgement to decide how much to return. If the tenant is happy, all well and good, but if they’re not, they can refer it to the redress scheme’s dispute resolution process.

This blog post explains what landlords and tenants alike need to know about what deductions a landlord can legitimately make from a deposit.

>> Related Post: What landlords need to know about Deposit Protection Schemes

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How should good landlords approach returning deposits to tenants?

Good landlords are fair and reasonable with the return of the deposit. After all, a deposit is a safety net for the landlord, not a pot to help refurbish the property after the tenants leave. The deposit remains the tenants’ money throughout the tenancy, and it must be held under a government-approved tenancy deposit scheme.

Landlords should refund the deposit in full at the end of the tenancy unless it is reasonable, fair and proportionate for them to make a claim against the deposit.

If the landlord carries out a pre-checkout inspection a few weeks before the end of the tenancy and has made clear what the tenant needs to do to get back the full deposit, the tenant will hopefully have attended to the problem areas, and the landlord can return the deposit in full. Everyone is then happy, as the tenant gets their money back quickly, and it’s less work for the landlord in getting the property ready for new tenants.

>> Related Post: 7 Tips for a successful end of tenancy checkout

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Check what the tenancy agreement says about deposit deductions

The first step is to check what the tenancy agreement says about how the deposit can be used. It outlines the extent to which a landlord can make deductions from the deposit. For instance, the NRLA standard assured shorthold tenancy agreement states that the landlord can deduct the following from the deposit (not an exhaustive list):

  • any rent arrears.
  • reasonable costs to rectify a breach by the tenant, including cleaning and the removal or storage of items belongings left behind.
  • compensation for damage to the property, fixtures and fittings and missing items “subject to an allowance for fair wear and tear, the age and condition of any such item at the start of the tenancy”.

>> Related Post: What to do when tenants leave things behind

How to assess whether a deposit deduction is fair and reasonable?

Landlords can usually make a claim against the deposit where tenants damage the property beyond fair wear and tear, they are in rent arrears or missing items, or where the property that is not in the same state of cleanliness as at the start of the tenancy.

Any deductions must be reasonable and reflect the actual costs to the landlord, and not include deductions for fair wear and tear caused by normal, everyday living. 

In order to assess what is a fair deduction for both the landlord and tenant, it is wise for the landlord to arrange for a detailed check out inventory. This should include descriptions and photographs to record the condition of the property, its decor, outside space, fixtures, fittings and any furniture, and the state of the cleanliness of the property.

The landlord should compare the check out inventory with the check in inventory. This is why it’s important to have a comprehensive check in inventory. The landlord should expect a reasonable level of wear and tear, which reflects the length of the tenancy, the number and age of occupiers, and the quality of the fixtures and fittings in the property. 

The Tenancy Deposit Scheme has published a very useful ebook in conjunction with the NRLA called A Guide to Product Lifespans. It explains product lifespans and the factors that affect them for the purposes of deposit deductions. For instance, the lifespan of carpet varies from 2 to 15 years, depending on the quality and whether it is a high traffic area like hallways. The lifespan of decoration is 3-5 years and ovens from 9-15 years, depending on the quality.

What happens if a tenant doesn’t agree with deposit deductions?

If the landlord wishes to make deductions against the deposit, they need to ask the tenant if they agree. If the tenants don’t agree, the tenants (or the landlord) can refer the matter to the dispute resolution service of the deposit scheme.

However, it’s much better to reach agreement with the tenant as the dispute resolution service is time-consuming.

The detail of the dispute resolution procedure differs from scheme to scheme. Taking MyDeposits as an example, a tenant cannot raise a deposit dispute, they need to have paid their rent in full, have met the contractual obligations and have formally requested the return of the deposit from the landlord or agent, and 10 calendar days to pass.

Tenants have the choice of raising the dispute online or by post, within three calendar months of the date that they move out of the property. The tenant needs to provide a copy of their formal request, together with any evidence, such as photos and any check-in or check-out inventory reports.

>> Useful Resource: How to carry out successful mid-tenancy inspections

What evidence do landlords need to support deposit deductions?

laying carpet in a rental property
Landlords should keep receipts to show the quality and age of carpets

The landlord needs to provide evidence to show the dispute resolution service that the deductions are reasonable and proportionate. The deductions should reflect the expected life span of the item (as explained above), any deterioration of its condition over the course of the tenancy beyond reasonable wear and tear, and any deterioration in the cleanliness of the property compared to check-in.

This evidence includes the landlord’s receipts for the items (eg carpet) which show its quality and also its age, together with the check in and check out inventory reports, and inspection reports. Emails can also be useful, for instance, a follow up email after an inspection in which the landlord points out some damage to the tenant, and asks them to rectify it. If the landlord needs to pay for a replacement or a repair, they should provide copies of quotations or receipts, together with before and after photos to justify their decision.

Equally, a tenant may show an email or that demonstrates the landlord agreed to a modification, eg painting a white room blue, or that they had been asking for something to be repaired, and the delay caused more damage.

What if the landlord wishes to replace with an upgrade?

If a landlord wishes to replace items or decor damaged by the tenant with better items or decor, which improves the condition of the property, the tenant will only be liable on a “like for like” basis.

This means a proportionate amount of the replacement, taking into account wear and tear, together with the produce lifespan of the original item. Tenants do not contribute to the extra cost of an upgraded item.

How long does a landlord have to repay the deposit?

Once the landlord and tenant agree on the amount of any deductions, the landlord must repay the deposit, less any agreed deductions, within 10 working days.

Good landlords keep their tenants updated on what’s happening with the deposit, and message or email them promptly to let them know when the deposit is on the way. If the tenant left the property in good condition, with no deductions needed from the deposit (it does happen!), thank them for leaving the property in such good condition. It costs nothing and shows their efforts were appreciated.

>> Related Post: What landlords need to know about Deposit Protection Schemes

Final thoughts

When landlords are deciding how much of the tenant’s deposit they would like to retain, they should apply the golden rule. This means treating the tenants as they would wish to be treated themselves if the tables were turned.

If a tenant has lived in the property for a long time, don’t penny pinch. You’re likely to need to redecorate if tenants have been there 3-5 years in any event. On the other hand, if the tenants have damaged the property or left it dirty when it had been let after a professional clean, make sure you have the evidence to support your claim for deductions to be made from the deposit.

What deductions can landlords make from deposits?

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