For many years, residential landlords have taken a financial deposit from a prospective tenant to protect against breaches of the tenancy agreement. These breaches could be for things like cleaning, damage/loss of property, unpaid rent or bills.
The deposit remains the property of the tenant at all times. It is held by the landlord or his agent until the end of the tenancy. The deposit should not be used to subsidise the outgoings or expenditure of the landlord or his agent unless the parties specifically agree to this or the tenancy agreement allows it.
The deposit is regarded as the tenant’s money. This means that it should be returned to the tenant at the end of the tenancy, if they have honoured the terms of the tenancy agreement. Since April 2007 tenancy deposits for Assured Shorthold Tenancies in England and Wales have to be protected by an authorised tenancy deposit protection scheme.
NMC Property use The Deposit Protection Service (The DPS)who operates a custodial scheme. This means that The DPS holds the deposit throughout the tenancy agreement.It should, however, be noted that dispute resolution, by its very nature, is unique to each and every case. Unlike the formal legal system, schemes are not governed by ‘precedent’ in the same way as the Courts. Decisions are made by the schemes on the principle of ‘balance of probability’. Decisions are made based on the submission of evidence from both parties."
WEAR AND TEAR
FAIR WEAR AND TEAR
This means making an allowance for:
• The original age,quality and condition of any item at commencement of the tenancy
• The average useful lifespan to value ratio (depreciation) of the item
• The reasonable expected usage of such an item
• The number and type of occupants in the property
• The length of the tenants occupancy
It follows therefore (and is an established legal tenet) that a landlord is not entitled to charge his tenants the full cost for having any part of his property, or any fixture or fitting, ".....put back to the condition it was at the start of the tenancy."
BEYOND FAIR WEAR AND TEAR - THE PRINCIPLES OF REMEDY
The landlord/agent has a duty to adopt the most reasonable and practical and appropriate approach to assessing remedy, and should keep in mind that the tenants' deposit is not to be used like an Insurance policy where you might get "full replacement value" or "new for old"
The appropriate remedies available to a landlord might range from or include :
• Replacement of the damaged item where it is either severely and extensively damaged beyond economic repair or, its condition makes it unusable
• Repair or Cleaning
• Compensation for diminution in inherent value of the item or the shortening of its useful normal lifespan.
Remember, the landlord/agent has a duty to adopt the most reasonable and practical remedy.
BETTERMENT AND APPORTIONMENT
AVOIDING BETTERMENT & CONSIDERING APPORTIONMENT
The landlord should not end up, either financially or materially, in a better position than he was at commencement of the tenancy, or than he would have been at the end of the tenancy having allowed for fair wear and tear.
To avoid betterment, the allocation or apportionment of any costs, charges or compensation for damage must take into account all the factors relating to:
(a) fair wear and tear,
(b) the most appropriate remedy and,
(c) that the landlord should not end up either financially or materially in a better position than he was at commencement of the tenancy or as he would expect to be at the end of the tenancy
having considered (a) and exercised (b).
The principles of some very general examples might include
1. A small to medium stain or mark on a carpet or mattress - perhaps £15 - £35 e.g. the cost of a "spot" clean or, this amount as the tenants' contribution to a full clean of the whole item, or as
compensation for the diminution.
A small to medium size chip or mark, scratch or burn on a kitchen worktop - perhaps £5 - £25.
A landlord could of course decide to have a new carpet put
down or a new kitchen worktop installed if they wished, but, they cannot lawfully charge the tenant for that full cost. The costs should be apportioned and shared between landlord and
tenant on the principles given above.
E.g. Cost of new carpet £500 - apportioned £465 to
landlord, £35 to tenant.
2. In the rare circumstances where damage (to the worktop/carpet/mattress) is so extensive or
severe to the item so as to affect the achievable rent level/lettability or quality of the property the
most appropriate remedy might be to apportion costs according to the age and useful lifespan of the item.
(a) Cost of similar replacement carpet £500-00 (a)
(b) Actual age of existing carpet 2 years (b)
(c) Average useful lifespan of 10 years (c)
that type of carpet
(d) Residual lifespan of carpet
calculated as (c)less (b) = 8 years (d)
(e) Depreciation of value rate of
carpet calculated as (a)
divided by (c) = £50 per year(e)
(f) Reasonable apportionment cost to
tenant calculated as (d)times (e) =£400-00 (f)
This method of calculation could, (with a minor downwards adjustment to (c) to take account of the existence of more than average use of the carpet/item e.g. its useful lifespan had already
been shortened prior to the tenancy in question.), be used to apportion costs of a carpet/item which had already or previously suffered excessive deterioration.
ADR is an alternative way of resolving disputes, other than by using the traditional route of the Courts. It is an evidence based process, where the outcome is decided by an impartial and qualified adjudicator. All tenancy deposit protection schemes use the‘adjudication’ method to deal with deposit disputes.
The parties in dispute are required to submit their evidence to the adjudicator. They will need to do this within specified timescales laid down by the individual deposit protection scheme. The adjudicator will analyse and consider the evidence and make a binding decision as to how the disputed amount of the deposit should be distributed.
Remember that the tenant has no obligation to prove his argument, because the deposit remains his property until successfully claimed for by the landlord. A landlord must prove that he has, on the ‘balance of probability’, a legitimate claim to retain all or part of the deposit. If he can’t, the adjudicator must return the disputed amount to the tenant. Because participation in this ADR process requires consent by both parties, the final decision of the adjudicator is binding on both the landlord and tenant.
For more information regarding deposit returns and disputes please look on The Deposit Protection Service web site www.depositprotection.com."