Thursday, September 03, 2009

Tenancy deposit arbitrations - why landlords keep losing

Note - the Landlord Law Blog has now moved to

Reading through the excellent 'Landlord & Buy-to-Let Magazine' today (September/October 2009 issue), I particularly enjoyed reading the landlords diary at the back by Barry Brunton. This gave some interesting background information on tenancy deposit arbitration's, which I thought I would share with you.

I was especially interested as a number of readers of this blog have posted their complaints about too tenant friendly arbitrators, for example here. In the context of this, Barrys article is quite enlightening.

He makes the point first that the tenancy deposit belongs to the tenant, and the landlord, if he wants to make deductions, is making a claim which he will have to prove by evidence. And if you do not provide this, you will lose your claim, the arbitrator is unlikely to write and ask you for it. For example:

  • Inventories - these need to be a detailed condition report on the property not just a list of the furniture in it. To make a claim for damage to furniture (for example) you are going to have to prove that it was in good condition at the start of the tenancy. It is best that this is done by an independent firm of inventory clerks
  • You will also need a check out report, again this should be done by the independent inventory clerks
  • Photos are generally of no value as they could be of anywhere. Presumably if they are signed by the tenant and inventory clerk on the reverse and dated they should be acceptable. If used they should be clear and have something (such as a ruler) to show scale.
Barry then explains how an adjudicator would approach a claim for a damaged carpet.
  • He would want to know the condition of the carpet both at the start and at the end of the tenancy
  • Evidence of when it was purchased
  • The cost of replacement
  • And the normal life of such a carpet
  • He would consider whether it could instead have been cleaned
  • Or whether any stain is relatively insignificant and can be left
  • In his award he will consider fair wear and tear
  • And base his award on the cost of replacement carpet but not underlay
  • For a ruined 3 year old carpet, the landlord (he says) will be lucky to get 40%, even if he can prove everything, as a tenants deposit is not a 'new for old' insurance policy
This is a bit different from in the old days, when the landlord would just deduct the cost of a new carpet leaving the tenants to sue him at the county court if they disagreed.

It seems that adjudicators also expect landlords to post notices explaining how things work and will accept a tenants excuse that he did not know (and therefore is not responsible for damage through misuse) even if the landlord has provided manuals. For example in one case, a tenant ruined a lawnmower by not putting oil in, but he successfully argued that he should not be held responsible as there was no 'check oil before use' notice on the mower, even though this was set out the manual he had been given.

I am beginning to see why landlords are often so incensed at arbitration results. I agree that the landlord should have to prove his case, but this seems a bit too much. I wonder whether a Judge in a County Court case would have come to the same decision.

Have you any stories to tell? If so please post a comment.

In the next issue, Barry is going to talk about adjudicators dealings with claims relating to gardening, condensation and tenants changing. Order your free copy now.

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Steven Hilton @ NLA said...

Tessa - THANK YOU! I enjoyed Barry Brunton's diary too and I think you both raise the critical point...

I reckon that tenancy deposit protection still manages to confuse many landlords that we speak to. They seem to think the deposit is theirs and it isn't.

The schemes start from the premise that it belongs to the tenant. Evidence is needed to justify deductions.

The big challenge is helping landlords prepare their properties at the beginning of a tenancy so that those tenants who know how to 'play the system' don't have an excuse at the end.

Anonymous said...

Whilst I agree with much of the sentiment, should the adjudicators not be using a civil level of evidence, on the balance on probabilities, rather than what it often appears, "beyond all doubt"! After all if the case was taken to court instead of the adjudication that is what the landlord would have to prove.

Nick said...

The sad thing is that the people who are going to pay for the damage are the tenants who leave a clean and undamaged property.

The other question that will be interesting to discover is whether the Inland Revenue are going to agree with 60% depreciation on carpets over 3 years.

I wish!

Anonymous said...

As a landlord who failed to retain as much as he hoped from a deposit throught the DPS arbitration system, I have simply decided that I will sue for every other deposit retention and take my chances in court.

The evidence put forward by the tenant would not, in my view, have satisfied a judge, but it did satisfy the arbitrator ... and I have some reason to have confidence in that I am a barrister who practising in property related litigation including landlord and tenant law.

Tessa Shepperson said...

In one of the comments to this post here, it was suggested that unhappy landlords could challenge arbitration's under the Arbitrations Act. What do you think?

Anonymous said...

This is not legal advice and should not be treated as such. My instinct is that a serious difficulty with such a challenge is that you would have to show that there was a serious irregularity with the award under s.68 (I think?). My initial reaction is that would be quite difficult to do as the purpose of the act is to reduce/elminate the need for litigation - an alternative would be some serious failure of understanding in relation to the law (which is unlikely as most of this sort of dispute is fact sensitive).

So anyone starting proceedings after an award would start at least 15 love down!