What Can a Landlord Deduct from a Deposit?

Managing the nuances of a landlord and tenant relationship can often feel like a balancing act, especially when it comes to the boundaries of tenancy deposits. For landlords, this includes understanding what you can deduct from a tenancy deposit.

Understanding tenancy deposits and the role they play during a tenancy is crucial for landlords seeking to protect their property, while also respecting tenants' rights. As well as fulfilling their legal obligations to whichever deposit protection scheme they choose, landlords need to be aware of exactly what they can and cannot deduct from deposits to avoid any potential disputes. 

In this guide, our expert private landlord solicitors explain what landlords can legally deduct from a deposit, and the steps you can take to prevent or resolve a tenancy deposit dispute. If you have any questions we have not covered, the team at Percy Hughes & Roberts Solicitors is able to answer your landlord query. You can contact us by completing the enquiry form below or by calling 0151 666 9090.

What Is a Tenancy Deposit?

A tenancy deposit is a sum of money that a landlord requires from a tenant as financial security at the start of a tenancy agreement. This deposit acts as a safeguard for the landlord against potential breaches of the lease by the tenant, such as damage to the property, unpaid rent, or failure to meet other specified obligations within the tenancy agreement. 

The amount of the deposit typically equates to up to five weeks' rent for tenancies where the annual rent is less than £50,000, or six weeks' rent where the annual rent is £50,000 or more. The landlord or agent must secure the deposit in a deposit protection scheme.

At the end of the tenancy, the deposit can be fully or partially returned to the tenant, depending on whether there has been any damage to the property, unpaid rent, or other breaches of the tenancy agreement. If the landlord intends to make deductions from the deposit, they must provide the tenant with an itemised list of deductions and the reasons for them. You must learn the legal restrictions on what you can deduct at the end of your tenancy agreement so that you can reclaim your costs from the scheme before giving the balance of the money back to the tenant.

What Can a Landlord Deduct from a Deposit?

A landlord can deduct from a tenancy deposit for several reasons. Primarily, these deductions aim to cover the costs associated with any damage tenants have caused to the property beyond fair wear and tear, unpaid rent, or other breaches of the lease agreement. Here is a breakdown of the common reasons for deductions:

1. Damage to the property: This includes damage to the building itself, and any fixtures, fittings, and furnishings provided by the landlord. It does not include general wear and tear, which refers to the natural deterioration of the property and its contents over time through normal use, but may cover specific instances of broken furniture or property damage.

2. Cleaning costs: If the property is not left at the same level of cleanliness as it was when the tenant moved in, the landlord can charge them for the cost of bringing it up to standard. This is why it is important to document the state of the property before the tenancy begins. 

3. Unpaid rent: Any outstanding rent at the end of the tenancy can be deducted from the tenant’s deposit.

4. Unpaid bills: If there are any outstanding utility bills or council tax that the tenant was responsible for, the landlord can deduct these costs from the deposit.

5. Gardening work: If there is a garden at the property and the tenancy agreement required the tenant to maintain it, costs can be deducted if this has not been done to the agreed standard.

6. Missing items: If the property came furnished or with certain items provided by the landlord and these are missing or damaged beyond repair, the cost of replacing these items can be deducted.

7. Alterations: If the tenant has made any unauthorised alterations to the property, the cost of restoring it to its original condition may be deducted.

It is important for both landlords and tenants to document the condition of the property and its contents at both the start and the end of the tenancy. Typically this means creating a detailed inventory and condition report. This can help prevent disputes over deductions.

Tenancy deposit protection schemes also play a crucial role in the process. Landlords are required to place a tenant's deposit in one of these schemes within 30 days of receiving it. This safeguards the deposit and helps to make sure that any deductions are justified and fair. If there is a dispute over deductions, the scheme will offer a free and impartial dispute resolution service, which can help to resolve disagreements between landlords and tenants.

What Can’t a Landlord Deduct from a Deposit?

While landlords can make deductions from the tenancy deposit for specific reasons, there are also clear restrictions on what they cannot deduct. These restrictions are designed to protect tenants from unfair deductions. Here is what cannot be deducted from a tenant’s deposit:

1. Fair wear and tear: Landlords cannot deduct money for normal wear and tear of the property. This includes minor scuffs on walls, carpet wear, and general ageing of the property and its fixtures. Wear and tear is expected over time from normal use and costs must be borne by the landlord or letting agent.

2. Betterment: Landlords cannot charge tenants to replace old items with new ones or for the purpose of upgrading their property. Any replacement or repair should be on a like-for-like basis, taking into account the age and condition of the damaged item.

3. Pre-existing damage: Any damages that were already present when the tenant moved in should not be charged to the tenant. This is why it is important for both parties to agree on an inventory at the start of the tenancy.

4. Issues beyond the tenant’s control: This includes damages that are a result of normal structural wear, ageing of the property, or external factors like storms or burglaries.

5. Costs for avoiding maintenance: Landlords cannot use the deposit to cover the costs of their own responsibilities, such as repairs to the building's structure, fixtures, and fittings that are the landlord's obligation. They must also avoid deductions for problems that arose because the landlord did not meet their maintenance obligations.

6. Improvements: If a tenant makes improvements to the property with the landlord's permission, they cannot be charged for reversing these changes unless it was agreed otherwise.

7. Unreasonable cleaning charges: While landlords can deduct for cleaning to return the property to the same level of cleanliness as at the start of the tenancy, these charges must be reasonable. They cannot charge excessively or for cleaning that would be considered fair wear and tear.

8. Third-party services: Landlords cannot deduct for services or contracts the tenant did not agree to, such as maintenance services the landlord decided to undertake without the tenant's consent.

Protecting deposits from deductions such as these is one of the responsibilities of a deposit protection scheme, so it is important for every private landlord to adhere to the law in this area.

What Is Classed as Fair Wear and Tear?

Fair wear and tear refers to the natural and inevitable ageing of a property and its contents due to normal use over time. It is an important concept in the context of tenancy agreements and deposit deductions, as landlords cannot deduct costs for issues considered to be fair wear and tear from a tenant's deposit. 

Understanding what constitutes fair wear and tear helps both landlords and tenants manage expectations and responsibilities regarding the property's condition. Here are the key points that help define fair wear and tear:

• Ageing of materials and items: Over time, certain items and materials within the property will show signs of ageing. This includes fading paint on the walls, carpet wear in high-traffic areas, and the gradual wear of furniture fabrics.

• Normal use: The effects of daily living activities on the property and its fixtures could result in minor scuffs on walls, loose door handles, and slight fading of curtains due to sunlight exposure.

• Number of occupants and tenancy duration: The level of fair wear and tear can be influenced by how many people are living in the property and the length of the tenancy. A property occupied by a family for several years, for example, will likely show more signs of wear than one lived in by a single occupant for a shorter period.

• Distinguishing wear from damage: Unlike damage that might result from negligence or accidents (e.g., burns, stains, or significant markings), fair wear and tear refers to deterioration that occurs despite the tenant using the property in a reasonable and responsible manner.

Landlords are expected to take fair wear and tear into account and not deduct costs associated with it from the tenant's deposit. Regular property maintenance, including painting and replacing worn fixtures, falls under the landlord's responsibility to keep the property in a good state of repair. 

Recognising the difference between fair wear and tear and actual damage is crucial in ensuring fair treatment for both parties involved in a tenancy. Because this can be complicated, it is often worth speaking to an expert landlord solicitor for advice before deciding on any deductions.

How Can Landlords Avoid Tenancy Disputes in Relation to Deposits?

Avoiding tenancy disputes over deposits is in the best interest of both landlords and tenants. This is one of the best ways to foster a positive relationship and deliver a smooth transition at the end of a tenancy. Here are some strategies landlords can employ to minimise the risk of disputes related to deposit deductions:

• Tenancy agreement: Clearly outline maintenance responsibilities and deposit deduction criteria in the tenancy agreement to avoid misunderstandings.

• Inventory checks: Conduct detailed inventories at the start and end of each tenancy. Documenting the property’s condition will support any deductions.

• Communication: Keep lines of communication open, encourage tenants to report issues promptly, and discuss any concerns about potential deductions early.

• Separate wear from damage: Be reasonable about what constitutes fair wear and tear versus actual damage or neglect to avoid unwarranted deductions.

• Provide evidence for deductions: Justify any deductions with transparent evidence, including repair invoices or quotes, to build trust and understanding.

• Seek professional advice: For complex situations or to ensure compliance with the law, consider consulting with legal experts in landlord-tenant law, such as Percy Hughes & Roberts Solicitors.

Avoid deductions that do not comply with the law or the rules of a deposit protection scheme to nurture the best possible relationship with a tenant. Even when a tenancy ends, it is important to maintain your reputation.