Ask TDS "What can/can't I use my tenant's deposit for?"

The Tenancy Deposit Scheme (TDS) is a government approved scheme for the protection of tenancy deposits; we offer both insured and custodial protection. We also provide fair adjudication for disputes that arise over the deductions from the tenancy deposits that we protect. This article has been written in response to a landlord’s query: “What can/can’t I use my tenant’s deposit for?”

tenants deposit


 

deposit protectionAre there restrictions on the use of a tenant’s deposit?

Starting a tenancy can be quite daunting, especially for new landlords. Most landlords take a deposit to be held as security against the tenant’s obligations under the tenancy agreement. At the end of the tenancy, the deposit can be used to compensate the landlord for any loss. So can a landlord use the deposit for anything at all? The starting point is that the deposit is the tenant’s money, and at the end of a tenancy it should be returned to the tenant. The exception to this is when there has been a breach of the tenancy agreement by the tenant which has resulted in a financial loss to the landlord.

tenancy agreementGetting the tenancy agreement right

It is essential that you think about what you may want to use the deposit for at the end of the tenancy before the tenancy even starts, as you should put a deposit clause into your tenancy agreement. A good deposit clause will include that the deposit can be used at the end of the tenancy for cleaning, damage, missing items, gardening, redecoration, outstanding rent or to remedy any other breach of the tenant’s obligations under the tenancy agreement. Most deposit deductions are agreed by the tenant and landlord without recourse to TDS’ adjudication service. Where a deposit return does result in a dispute, the starting point for the adjudicator will be the deposit clause in the tenancy agreement. Unfortunately, if the tenancy agreement is silent about what the deposit can be used for, it is unlikely that the adjudicator will make an award to the landlord. Therefore the use of the tenant’s deposit is restricted to purposes that were agreed by both parties in the tenancy agreement at the start of the tenancy.

tenants depositSpecial clauses in the tenancy agreement

In certain circumstances you may wish to add unique clauses to a tenancy agreement. For example, if you have agreed that the tenants may keep one small dog in the property on the condition that they provide a 'pet deposit' which is to be used in the case of any professional cleaning, or pest removal at the end of the tenancy. It is important that you are clear about the responsibilities of the tenants without being too restrictive in the terms.

For example, if you state that the deposit may be used for any damage caused by the tenant's pet, you may then be obliged to prove that the damage was caused by the pet. Equally, you may also choose to name the pet in question, quantifying that this is the only pet allowed to reside at the property. This prevents you agreeing to one dog, and later discovering that the tenant also had 3 cats and a gerbil.

 


 

Adjudication is not needed in most tenancies, TDS finds that only 1% of deposits protected by TDS require our alternative dispute resolution (ADR) services. If open communications are maintained throughout a tenancy, landlords will find it easier to ensure the property is returned in the same standard as it was at the start of the tenancy. Equally, tenants are more likely to agree to costs being recovered from their deposit, without ADR, if they can see the claim is reasonable and reasoned.

You may find our other #AskTDS blogs useful, such as this one about a landlord claiming for redecoration costs, or this tenant asking about when deposits should be returned.


Posted by Zoe Knighton on 9 February 2017

Back to Blog Articles