What are the biggest deposit disputes and how can landlords protect themselves?

In the 2023/24 year, 14,585 deposit disputes were adjudicated by the Tenancy Deposit Scheme (TDS) – nearly 11,400 and 3,200 (respectively) under the England and Wales Insured Scheme with most involving more than one issue.

The majority were about damage (around 45%) and cleaning (between 59% and 65% across the two schemes) which have been the biggest areas of contention for some years now. Redecoration, rent arrears and gardening make up the rest of the top five reasons for disagreement.

It’s important to understand that, legally, the deposit money always belongs to the tenant. So, if the landlord wants to retain any of it at the end of the tenancy, the burden of proof is on them to provide evidence to support their claim. This is why it’s so important to have a detailed inventory taken before the tenant moves in and keep clear records of all inspections and communications regarding the property condition and rent payments.

How are most disputes resolved?

Around a third of cases brought to the TDS were resolved between landlords and tenants themselves via the online platform or through mediation. The adjudicator considered the remaining two-thirds.

In 80% of insured scheme cases and 70% of custodial, the award was split. Under both schemes, only 7% of cases went 100% the landlord’s way, whereas 13% of insured deposits and almost a quarter of custodial ones were awarded entirely to the tenant.

Although the final adjudication is binding, it is possible for either the tenant or landlord to request a review if they feel an error has been made. But this is rare and happened in less than 4% of adjudications during the year.

How can insurance help protect landlords?

With damage being by far the most common deposit claim, it’s vital for landlords to consider whether they should have insurance cover in case the cost of repairs is more than the deposit amount held, and the tenant can’t or won’t pay. If a tenant has caused substantial damage to a property, we know that some simply disappear without leaving forwarding details.

Because insurance policies vary, you should also check to make sure your landlord policy includes cover for both accidental and malicious damage, as not all damage caused by a tenant is accidental. Importantly, make sure:

1. There is a clear record of the condition of the property and contents before the tenant moved in.
2. You can prove to your insurer that you have made every reasonable effort to recover the cost from the tenant – e.g. proof of a filing in the small claims court or evidence you have tried and failed to locate them.

As rent arrears accounts for 20% of deposit claims, it’s also worth considering using Premier Service if you let your property with an LRG agency. If a tenant has fallen significantly behind with their rent – whether that’s because of affordability issues or wilful non-payment – it may be difficult to reclaim the full amount owed, and the Premier Service covers your monthly payments until the tenant can be evicted.

Budget for wear and tear

We do find that some landlords will submit an insurance claim for ‘damage’, when it is actually just reasonable wear and tear (a specific exclusion with most insurance policies). This tends to be more common when a tenant has been in the property for several years and there is therefore more natural dilapidation.

Before making a claim against a tenant’s deposit or contacting your insurer, consider how long the tenant has lived in the property. It’s reasonable for it to need redecoration every 3-5 years and for furniture and carpets to be replaced every 5-8 years - although it will depend on the quality of the original item. So plan ahead, budget for periodical repairs and refurbishment, and set some money aside every month to make sure you don’t get hit with an unexpected bill.

To discuss appropriate landlord insurance for your rental property please get in touch with us, or if you have any questions about Premier Service, get in touch with your LRG agency.

If you are a current landlord with any of the agencies in LRG, an insurance quote is ready and waiting for you in your online landlord account. No fuss or forms to fill out!

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