Landlord News

Review of Tenant Deposits, Claims & Procedures

December 2014

Tenant Deposit Scheme (TDS)

The Tenant Deposit Scheme has been running in Scotland for around two years. Landlords, or their agents, have to transfer any deposit monies taken from the tenant(s) to a registered TDS within 30 days of the commencement of a tenancy.

If there is a dispute between the tenant and the landlord about the deposit claim at the end of the tenancy, the case will be referred to Alternative Dispute Resolution (ADR) scheme and an independent adjudicator will take a look at the evidence and make a final judgement.

'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 they have, on the 'balance of probability', a legitimate claim to retain all or part of the deposit. If they can't, the adjudicator must return the disputed amount to the tenant.' Letting Protection Service Scotland.

Splendid Property Check out & Deposit Procedure

  • SPM provide check-out information to tenants prior to them moving out
  • Pinstripe Inventories & SPM check-out of property
  • Cleaning (if required) is carried out immediately to ensure property is ready for new tenants
  • Maintenance (if required) instructed to ensure property is ready for new tenants
  • Tenants contacted with details of claim from deposit (if any)
  • Negotiation on deposit claim, if required and appropriate, to try and prevent claim going to dispute resolution
  • Agreement from all parties, deposit claims agreed and deposit administration finalised
  • If agreement is not reached, deposit claim submitted by SPM and tenant asks for dispute resolution
  • ADR adjudicator asks for evidence for claim
  • SPM provides pack of evidence to support claim and awaits result (this process can take several weeks)
  • Decision made by ADR adjudicator and deposit claims transferred as per the ruling

Contractor payments

Any cleaning or repairs are instructed immediately to ensure the property is brought up to standard required for new tenants. These invoices are charged to the property account but will be refunded once the claim has been transferred from the Tenant Deposit Scheme to our client account (assuming the claim is won).

Cleaning Costs

Although claims from tenant deposits are requested for all manner of different reasons, by far the most common claim against a deposit is for cleaning.

We use professional contract cleaning companies who are able to cope with the high workload, are used to dealing with end of tenancy cleans and will bring the property up to the expected commercially clean standard. They charge around £18 per hour and the costs of the cleaning can be high, especially in the bigger properties.

Some clients have expressed surprise at the costs of these end of tenancy cleans (which can run into the 100's of pounds on the bigger jobs). We constantly monitor the costs of cleaning as we are acutely aware that it causes conflict with tenants; we compare them with other cleaning companies and Edinburgh based managing agents' costs.

I would also like to make it absolutely clear that Splendid Property does not benefit financially from the cleaning of properties, we have no commercial interest in any of the cleaning companies we instruct and we do not receive any form of commission from them.

Deposit Claim Adjudication

The ADR adjudicators act in accordance with Scottish Law, they must be mindful of industry guidance and best practice with respect to fair wear and tear, unfair terms in tenancy agreements & best practice for inventory providers issued by ARLA, NAEA & RICS.

'Adjudicator' is defined within The LPS Scotland Terms and Conditions as an 'independent, impartial and qualified expert appointed by The LPS Scotland to adjudicate and provide a decision'. Letting Protection Service Scotland

There is no appeal to the adjudicator's decision unless the landlord believes the adjudicator has made an error of fact or an error of law.

Review of Deposit Disputes

We have reviewed a good proportion of the disputes which have gone to ADR for arbitration over the past year and there is certainly a pattern emerging with the reports we have had back from the ADR adjudicators.

  1. It is very clear that, without specific evidence or if there is any doubt, the adjudicators award claim to tenants not the landlord.
  2. The independent & extremely comprehensive inventory and check out reports provided by Pinstripe Inventories have been invaluable in the claims process - without a decent inventory, most claims would inevitably fail.
  3. The adjudicators seem particularly mindful of age/condition of items claimed for and will not award landlords the full replacement cost of items broken or missing or decoration unless brand new.
  4. The adjudicators will take wear and tear into account and always allow for this - their view is that landlords should accept that there will be significant wear and tear when renting their property (e.g. a recent ADR report stated that the hallway decoration can only be expected to last 2 years).
  5. They are very attentive about the concept of 'betterment' and ensure that landlords are not in a better position than when tenants moved in (an obvious example of this is redecoration when tenants have caused marks/damage beyond fair wear and tear).
  6. Although the adjudicators obviously work with some kind of industry guide when deciding on awards for cleaning and damage and so on, it is a subjective process and similar claims, with comparable evidence sometimes have differing outcomes.
  7. Landlords can only appeal if there is a factual error (i.e. the adjudicator noted the evidence incorrectly), not that they feel the adjudicator got it wrong.
  8. Windows - if the property is above ground level and the outside of windows are not easily accessible by tenants from the inside, they have a tendency to rule that landlords should cover the cost of professional window cleaners, not the tenants.
  9. Cleaning – On the whole, we tend to win between 70-100% of the cleaning costs claimed for although there are exceptions to this when the adjudicator disagrees with the time taken to clean the property - this is the one area which frustrates us most about the process and sometimes goes against the landlord despite the evidence. We have discussed with Pinstripe Inventories ways of making the cleaning requirements on the inventory check-out reports clearer to make it harder for the adjudicators to rule against landlords.
  10. Carpet Cleaning - It is difficult to persuade the adjudicator that professional carpet shampooing is required and they tend to only award, at best, part of the cost of this to the landlord even if, to us, it is obviously needed.
  11. Mattress protectors - we have been generally unsuccessful when claiming for dirty or missing mattress protectors as the adjudicators generally deem them to have a short working life of one tenancy.

Examples of adjudication decisions which went against the Landlord

Claim Type Amount Claimed Amount Awarded Adjudicator Reasoning/Notes
Missing Kettle & Vacuum £85.00 £42.50 'Whilst I accept that the Tenant should be liable for the replacement of these items, I am not satisfied that the Tenant should bear the full cost of their replacement to avoid betterment for the Landlord'.
Missing bin, lamp, chair & light shades £35 £0 'Whilst I accept that these items were missing…I find that the items would have exhausted their useful lifespan irrespective of the tenants actions.'
Damage to wall & ceiling £60 £35 'I am not persuaded that the sum claimed is a reasonable cost. On balance, I find that it is fair and reasonable to pay the sum of £35.'
Cleaning £290 £232 'I find that the tenant is only liable to pay a contribution towards the cleaning costs, which were incurred in order to return the property to the same condition it was at check-in, as opposed to the full cost of a professional clean.'
Cleaning £297 £170 'I am minded to agree with the Tenants that the sum claimed for bringing the standard of cleaning from grade 3-4 to grade 5 appears excessive. On balance, I am inclined to agree with the Tenant's submissions that a more reasonable sum could be £170.'
Window Cleaning (exterior) £60 £0 'having regard to the position of the property, and absence of evidence demonstrating easy access to the exterior windows, I do not consider it reasonable to require a tenant to clean the exterior of the windows'.
Cleaning £140 £60 'I am satisfied that the cleanliness of the property did deteriorate…in some areas. I do not accept that the extent of the work…is supported by the provided documentary evidence.'
Compensation for three burn marks in carpet £75 £60 'Having considered all of the documentation provided, I am persuaded that there were burn marks to the carpets.. I consider that £60 for those marks is reasonable.'

Conclusion

This ADR process appears to work in shades of grey, even when we sometimes think the evidence is black and white. We have submitted claims on deposits we thought were rock solid and the adjudicator has surprised us by not awarding the full claim; conversely we have had claims which we felt were shaky but have received the full amount claimed for.

It must be remembered that the adjudicators are sitting behind a desk and it is impossible for them to understand the particular nuances of each property and they all have a different subjective view on the type & size of property, levels of cleanliness or damage presented to them in the check-out reports. Ultimately they are making a judgement call from their own experience and it must always be remembered that they will always err towards the side of the tenant rather than the landlord.

Fundamentally, the ADR process, while both time consuming and occasionally frustrating, does work well if there are very obvious issues such as releasing any rent which is owed. Where we are seeing claims coming up short seems to be where the damage or the cleaning required is not particularly severe. We are finding that they regularly only award the Landlord part of the claim in these cases despite the fact that owners have to bring their property up to standard for the next set of tenants.

We sometimes disagree with the result; however, on the whole we feel that we achieve most of what we set out to claim. On occasion, we feel that the adjudicator gets it wrong in how he interprets the evidence provided but as there is no appeals process unless there is an error in fact or on the law, we are powerless to do anything about this.

Our experience of the arbitration process has highlighted that it is worth trying to negotiate with the tenants to see if a mutually agreed amount can be thrashed out as it is obvious to us that no matter how compelling the evidence, there is no guarantee that the claim will be fully successful.

Landlords should be willing to accept that, on occasion, the ADR process will not go entirely their way and if they go into the process thinking that they will receive most but not necessarily all of any (fair) claim, they will generally not be too unhappy.

Google+