Photo by J.O. Property
Tenancy deposit disputes happen when landlords and tenants can’t agree on deposit deductions. These have to be lodged with a Deposit Protection Service within 10 days of the tenancy agreement ending, and they will then step in to mediate.
Over the past year, there has been an increase in end-of-tenancy deposit disputes in the UK, according to Tenancy Deposit Scheme’s (TDS) 2022 Statistical Briefing. And as naturally everyone wants to avoid disputes, what can you do as a HMO landlord to try to prevent them wherever possible?
In this blog post, we’ll cover the numbers behind the rise in deposit disputes, the main reasons for them, and tips for how to prevent this from happening!
What’s Behind the Rise in Deposit Disputes?
Throughout 2021-22, the three tenancy deposit schemes in England and Wales issued 31,276 disputes, which was an increase of 1,579 from the previous year.
The rise in disputes was linked to the impact of the COVID-19 pandemic as fewer tenancies ended during the lockdown periods in 2020-21. While there has been an increase, disputes are fortunately only being raised in a low percentage of cases.
What Are the Main Reasons for Them?
The main reasons for deposit disputes are consistent across the UK. Cleaning claims are at the top of the list. In England and Wales, 50% of disputes are because of this, and this figure is 47% in Northern Ireland and 71% in Scotland.
Then, the second main reason is damage to fixtures and fittings, making up 45% of claims in Northern Ireland and 46% of claims in England, Wales, and Scotland. The third reason is rent arrears, ranging from 11% of claims to 22%.
Steve Harriott, CEO of TDS, states: “We have known for many years that cleaning and damage are the main claims made in tenancy deposit disputes. These figures show remarkable consistency across the UK over time, with the only oddity being that a massive 71% of disputes in Scotland involve cleaning claims.”
How Can You Prevent Deposit Disputes?
While it can be incredibly frustrating to have to deal with deposit disputes as a HMO landlord, it’s something you’ll have to handle at some point – or you may have already dealt with it on numerous occasions!
But while there has been a rise in deposit disputes, fortunately, there are some ways to help avoid these. Here are my top tips for doing just that!
1. Create detailed and accurate inventories.
When undertaking inventories, make sure you’re extremely detailed and accurate with the condition of furniture and rooms, and take the appropriate photos as well.
We use the previous inventory as a starting point and make updates as needed where there have been changes. It’s helpful to use a system that specialises in producing these documents, or you can get companies to take care of this for you.
You’ll also need to get your new tenants to agree upon the inventory. This means that when the tenants move out, you have a clear benchmark in place to check if their room or any furniture has been damaged.
2. Undertake regular inspections.
It’s highly recommended to undertake regular inspections of HMOs, whether it’s monthly, quarterly, or whatever time frame you decide. It’s not only about undertaking the inspection but also assessing the inspection report and actioning anything that comes out of it.
This can help you stay on top of whether there has been any damage to your rooms prior to tenants moving out. At the end of a tenancy, you’ll then also need to do a check-out inspection. This will help you decide whether there should be any deposit deductions due to cleanliness or damage.
3. Provide detailed moving-out information for tenants.
When your tenants’ move-out date approaches, send them helpful information about what they should do and how they should prepare for moving out.
We send all of our tenants a document with detailed move-out instructions. This includes information about cleaning and removing waste, in addition to how the check-out inspection and returning deposits work. This prepares tenants for what standard of cleaning is expected.
Note: If you’d like to access our moving-out instructions template, join The HMO Roadmap as an annual member!
4. Clearly communicate deductions to tenants.
Once you’ve determined if there are any deductions, whether from damage, cleaning issues, overspending on utilities, or rent arrears, you need to then communicate that to your tenants. Make sure you have clearly documented evidence to back yourself up. If you don’t you won’t stand a chance!
Protecting deposits and dealing with disputes is an important part of managing HMOs – whether we like it or not! You need to not only handle this properly but also adopt certain systems and processes to your HMO portfolio, which will hopefully help you prevent deposit disputes wherever possible.
For more advice on how to start, scale, and systemise your HMO business, become a member of The HMO Roadmap today!
About the Author:
Andy Graham is the founder and the lead trainer at The HMO Roadmap! He is also the co-founder of The HMO Mastermind and Smart Property, a specialist HMO property investment and management company. He writes as a regular columnist in different magazines about a variety of HMO topics and is the host of The HMO Podcast! Follow Andy on Instagram!