What happens about the deposit at end of tenancy now that TDS is here?

As a landlord, what should you do at the end of the tenancy as far as the deposit is concerned?

If all's well with the property and you're happy to see the cash handed back to your tenant, then it couldn't be simpler.  Just tell that to the deposit scheme administrator.  But what if you'd like to see £100 come your way to deal with any issues?  Here's a simple summary (as simple as the Regulations allow, that is)

The first thing to do is to have a converstation with your tenant.  You'll have had such conversations when you've visited periodically during the tenancy, and this is just another.  You can probably do it as you check him out (we'll use the masculine but as lawyers say "referencees to the masculine are deemed to include the feminine")   Indeed you really must do it then if there are any issues, although perhaps you'll need to finish the conversation later if you need to look into costs to make good.  The important thing is to raise the issues face to face in a non-confrontational way and seek to get his agreement, even if only in principle until costs are known.

Tell him you're not happy with the state of the whatever it is - let's say it's a professional carpet clean that's needed.  (Incidentally, English experience has been that by far the biggest number of disputes relate to cleaning, followed by unpaid rent and then damage or breakages.)  Perhaps you've raised concerns about this at the periodic visits, in which case he'll probably be anticipating what you're about to tell him.  That makes it easier.  Folks don't take well to a bolt out of the blue, and cleaning's particularly difficult as it's subjective.  Show him the ingoing inventory and ask him to compare the state of cleanliness recorded there with how it is now.  If he's a reasonable sort he'll agree and you should be home and dry.  (Well, just about)

You then need to write to the scheme administrator and propose that £100 be passed to you with the balance going to your tenant.  The administrator then writes to the tenant to seek either his agreement or a counter-proposal.  If your tenant's as good as his word, then he'll confirm his agreement to your proposal in which case the administrator actions it within 5 days.  (Days in the context of TDS are always working days, excluding week-ends.)  You can see why you need to have had that conversation.

The tenant must respond to the administrator within 30 working days.  If he doesn't then you'll get your £100 and the tenant's share will remain with the scheme in case he claims it later. (Any deposits left unclaimed after 6 years may be treated as ownerless and fall to be consigned to the Queen’s and Lord Treasurer’s Remembrancer)  It's worth adding that in the case of SafeDeposits Scotland, which Simply Let uses, any operational surpluses are passed to a charitable trust whose objective is to raise renting standards

But, what if you can't agree?  Some folks are just stubborn, particularly where cleaning is concerned and they believe everything is fine and that you're being pernickety.  Well, it then gets a wee bit more complex.

If you can't reach agreement then either party can ask the scheme administrator to refer the case to adjudication.  It's important to understand that this is adjudication, not a mutually negotiated settlement through mediation.  Adjudication is entirely evidence based and the adjudicator won't visit the property to see for himself or seek input from you or your tenant.  He'll simply decide in the privacy of his office on the basis of the evidence you each give him.  That's why you need a fully detailed ingoing inventory report, setting out the condition and state of cleanliness of the property at commencement, and signed by your tenant.  It helps too, to pass the adjudicator copies of any letters or e-mails you've sent to your tenant after your periodic visits setting out your concerns over cleanliness.  If there are issues at check-out you should produce a check-out report based on the ingoing report and highlighting the items at issue. (That's good practice even if all's well)  All of that should make it patently clear to the adjudicator that he needs to uphold your claim.  Oh.. the last bit you'll need to give him is the estimate or invoice (as the case may be) from your cleaning company.  If there's a particular problem such as a pink stain on a bedroom carpet what really helps is if the estimate or invoice relates directly to that in terms of the check out report.  (Instead of just "cleaning at such and such and address" ask them to quote the actual problem "removal of pink stain from bedroom carpet ....")

The scheme administrator will refer the case to adjudication only once he's satisfied that the two of you have made a real attempt to reach agreement and have failed.  Adjudication's not there to replace honest discussion and engagement.  Adjudication, I should have said, is also completely free to use.

The adjudicator needs to bring his deliberations to a close within 20 days of the referral (that's working days again of course) and then he has a further 5 days to tell you both his decision.  There is the possibilty for either party of an appeal against the adjudicator's decision, but only on the grounds of fact or law (or both).  You can't appeal just because you don't like the result!

So, there's potentially a fair bit of time drag in all of that.  However the fact that most tenants will need what's left of their deposit to put down as a deposit on their next place should focus their minds.  A difficult tenant though could slow down your access to any justified cash just when you need it quickly in order to restore the property to a markatable condition.

I should add that it's open to the tenant to instead use court process instead of adjudication, but I can't see why anyone would prefer to do that. 

There are some useful case studies here illustrating how adjudicators arrive at their decisions.  They are very informative and well worth a look.  Key to much of it is the concept of wear and tear, but that's for another blog.  Suffice it to say that you must take wear and tear into account when arriving at a proposed deposit retention.  If you aren't realistic about that you will be disppointed at any adjudication outcome.

If all's not clear, or if you have any questions, please get in touch.