Deposit Disputes - why do so many landlords lose?

Ending up in a dispute at the end of a tenancy is one of the least inviting prospects of being a landlord, and thankfully most tenancies end perfectly amicably. But when they do end in disagreement, many landlords manage to lose their claim, leading them to feel that the system is weighted against them.

The most important thing in a deposit dispute is for the outcome to reflect the reality, whether the fault is on the landlord or tenant side. The courts and arbitration services are not there to automatically find in favour of the tenant, but it is the landlord's responsibility to prove a claim is valid and realistic.

So, in this week's article, we're taking a look at why landlords – and particularly self-managing ones – lose so many disputes: from whether their claims are fair in the first place, to how they can improve the way they create and run their tenancies.

If you own a rental property and you've either lost a dispute, or you'd like to chat about minimising the chances of them happening, we'd love to talk to you.

Meanwhile let's see where things go wrong for landlords, how the outcomes can be different, and how many situations can be avoided altogether.

Whenever a property requires a knack for things to go right, you can guarantee it will come back as bad news.

One culprit here is condensation and mould. If your bathroom or kitchen are susceptible to either, the most effective option is to install an extractor fan with a humidity sensor that automatically activates. One small job removes all the possible consequences, costs and kerfuffle. Otherwise, you'll need to highlight the potential for mould and condensation in your tenancy agreement, and get your tenants to accept any future costs that arise from forgetting to open a window. Terms like that could lead to someone questioning whether your property is somewhere they want to live.

Another example of poor setup can be when renting to people with pets, which is usually problem-free but does require written agreement over any costs that may arise. If the responsibilities for these aren't stipulated at the outset – from damages to smells to infestations – your claim is at risk if the tenancy agreement is unclear. You’ll find that most tenants are quite happy to sign a clause accepting responsibility for any costs arising from their pets, or any visiting ones.

There are plenty of landlord groups on social media where you'll see posts that celebrate how cheaply someone has managed to renovate one of their rental properties. Often they find good-looking but ultimately poor-quality fittings that are not likely to last, and where a later visit from a contractor sends the price above the cost of buying something better in the first place.

Cheap taps or laminate floors in wet areas are a couple of quick tricks to making a kitchen or bathroom shine on the surface, but your property must be durable as well. It's tough to prove a tenant is at fault when the fittings and materials in a property simply aren't up to the job.

The same goes for repairs: if you respond quickly and attend to repairs, you'll show respect for your investment, your tenants, and your time. By making your property a low-maintenance home, you’ll have longer, happier tenancies and fewer repairs and disputes.

Every now and then, a property gets handed back in a condition where lots of work is needed to put things right.

You may feel rightly frustrated, disappointed or let down, but it's essential to keep a cool head. Whatever you do, and no matter how tempting, don't hold onto the security deposit in a way that ignores legal procedures, or you risk invalidating your claim.

Your best course of action is to obtain quotes as quickly as possible for all the works and costs, then submit them to the previous tenants along with any reports or photographic evidence, and with clear and comprehensive details about why they are responsible. You don't need to wait until you've settled your dispute to carry out any repairs, so your next tenancy needn't be delayed beyond the completion of the works.

Of course, it's a hassle, and you may not even want to speak to the people who've left your property in such a state (one of the benefits of having a managing agent to deal with it on your behalf!). Still, clear communication without resorting to angry recriminations is the most likely route to a swifter settlement.

The largest area of dispute between landlords and tenants is cleaning, accounting for around 25% of all claims.

In a way, it's comforting. Cleaning is not about breakages, repairs or arguments over wear & tear, so it's effectively a small dispute. Regardless of who wins, it's straightforward enough to get a property cleaned, but what a waste of everyone's time for such a mundane thing!

Of course, it can be more than a trivial issue if your incoming tenants have to move into an unclean home. It's not a great start to a tenancy, and a professional clean is more difficult to obtain while there are boxes everywhere and your tenants unpack.

Generally speaking, a dispute over cleaning comes up when one side skimps. Suppose you don't hand your property over in a professionally-cleaned state, and you don't employ an inventory clerk to take photographic evidence. In that case, any claim will be difficult to win at the end. The same goes for outgoing tenants: if they sign off on the cleaning when moving in, but can't produce a receipt for a professional clean when they leave, they are unlikely to win a dispute.

Unfortunately, some landlords do attempt unjustified or exaggerated claims against their tenants.

If you don't regularly inspect your property, there could be a few years between your visits, during which time signs of wear and tear will develop. Scuffs on walls, woodwork and floors are a part of life; ovens don't stay looking like new; neither does grouting or sealant - not even in the homes of landlords!

Areas like these are more noticeable when a property is empty than when it's lived in, and they'll also look far worse to you if it's been four years since your last visit.

Regular inspections are invaluable and, for us, they’re a normal part of the day. Anything that might have gone unnoticed in the everyday distractions of life tends to get picked up before it becomes a major problem and a cause for a dispute.

In summary:
As a landlord, there's a lot you need to get right: not just to minimise the opportunity for disputes, but to ensure you don't automatically lose them. The many laws that cover lettings are there to help you run your tenancies effectively, and well-maintained properties tend to attract higher-quality tenants, most of whom will love their home and treat it as if they owned it.

As a self-managing landlord, it can sometimes feel like an awful lot to stay on top of, so you might want to explore having your rental investments looked after by people who do it every day. If you have a property and you'd like to discover whether using a managing agent is the right decision for you, why not get in touch? We're here to make your life as a landlord as easy as can be.