How to dispute a deposit deduction as a landlord

What can I deduct from a tenancy deposit?

In law, a tenancy deposit is security for what the tenant owes under the tenancy: their obligations, or any liability arising from it (Housing Act 2004, s.212). In England the Tenant Fees Act 2019 lets you keep damages for a breach of the tenancy agreement (Schedule 1, paragraph 5), and government guidance says the Act doesn’t affect your right to recover damages through the deposit or the courts (GOV.UK).

In practice the deductions are for cleaning, damage, redecoration, missing items, gardening, rent arrears and unpaid bills the tenant was responsible for. Your tenancy agreement should say what the deposit can be used for: TDS says that without such a clause, an adjudicator is unlikely to make an award to the landlord (TDS).

Two limits apply to every claim. Fair wear and tear isn’t the tenant’s to pay for, and you can’t end up better off than at the start of the tenancy: an old carpet is claimed as a share of its cost, not the price of a new one. Our guide to fair wear and tear shows how that share is worked out. And you can’t claim the same damage twice, from insurance and the deposit: GOV.UK warns that doing so may be fraud (GOV.UK).

What needs to be in place before the tenancy ends?

• The deposit protected, and the prescribed information given, within 30 days of receiving it (Housing Act 2004, s.213). The information includes which scheme holds it, how its dispute service works and when part of the deposit may be kept (GOV.UK).
• A signed tenancy agreement. Without it, a claim is almost certain to be rejected (Guide to Deposits, Disputes and Damages).
• A check-in report the tenant saw and could comment on, ideally signed, with dated photos. Everything at the end is compared with it.

If the deposit wasn’t protected in time, the tenant can apply to the county court, which can order you to pay them between one and three times the deposit (s.214; GOV.UK).

How do I propose deductions?

Inspect soon after the keys come back, invite the tenant, and make a check-out report that follows the check-in room by room so the two compare (Guide to Deposits, Disputes and Damages).

Then write to the tenant promptly with each deduction, its amount and the evidence for it. TDS asks landlords to give tenants “a clear, itemised list, along with evidence” (TDS). A tenant who doesn’t reply hasn’t agreed.

Ask for what the evidence supports. The schemes’ guide notes that many landlords claim the whole deposit, but adjudicators award only what they think is reasonable. Talking helps: many disputes are settled by agreement, and you can settle at any point before the adjudicator decides. mydeposits puts it plainly: “it is never too late to negotiate” (mydeposits).

What happens when we agree?

The deposit must be repaid within 10 days of you both agreeing how much the tenant gets back (GOV.UK). For a custodial deposit, the scheme pays it within 10 days of being told you’ve agreed (Schedule 10, paragraph 4). For an insured deposit, you pay it; if you don’t within 10 days of the tenant asking, the scheme can direct you to pay the money to it (Schedule 10, paragraph 6).

What if we can’t agree?

Each scheme runs a free dispute service, sometimes called ADR. You and the tenant both have to agree to use it, and no scheme can make it compulsory (Schedule 10, paragraph 10). It isn’t mediation: nobody meets the adjudicator, and nobody visits the property. The adjudicator decides on the evidence each side sends, and the decision is final.

For an insured deposit, you pay the disputed amount to the scheme when the dispute starts. Then each side has a short window to send evidence:

Late evidence isn’t considered, so work the date out the day the scheme writes to you. Our free evidence deadline calculator counts working days and bank holidays for each scheme.

There are limits. The adjudicator can’t award more than the deposit or the disputed amount, and each side pays its own costs of preparing (mydeposits). TDS can’t decide a tenant’s counterclaims, or disputes between you and your agent or inventory clerk (TDS).

How does the adjudicator decide?

Starting from the position that the deposit is the tenant’s, the adjudicator asks whether you’ve shown, on the balance of probabilities, that the tenant broke the tenancy and that it cost you something. They look only at what you send and won’t ask for more. Our guide to what a deposit adjudicator looks for goes through the evidence that carries weight, and each scheme’s guide covers its own process: TDS, DPS and mydeposits.

The decision is binding. Each scheme allows only a narrow review or complaint, for a clear error in the decision, on its own time limit: our comparison of the three schemes sets them side by side.

When is court the better route?

mydeposits suggests court when the claim is more than the deposit, when the other side won’t use the dispute service, or when the dispute includes issues the scheme can’t decide. It also notes that court takes months, while a scheme decision usually comes in 8 to 12 weeks (mydeposits).

A claim worth up to £10,000 normally goes on the small claims track (Civil Procedure Rules, Part 26). Before issuing it, write to the other side with the details of your claim and give them a reasonable time to reply, usually 14 days in a straightforward case. The rules call litigation “a last resort” and expect both sides to consider settling another way first (Practice Direction on pre-action conduct).

Does this apply in Wales?

The three schemes work the same way in England and Wales, but the law around deposits differs: this guide describes England. In Wales, deposits fall under the Renting Homes (Wales) Act 2016, and the Tenant Fees Act 2019 doesn’t apply.