How to resolve deposit disputes without going to court
Every private landlord will at some point have to deal with a deposit dispute. It's inevitable a landlord will see the need to deduct cash from a security deposit to pay for damage or rent arrears. Hopefully, the tenant will accept the deduction and move on. But of course, that isn't always the case. A tenant has the right to challenge any deduction from their deposit.
When this happens you've three ways to solve the dispute:
Of the three options going to court should be the last resort and one you really want to avoid if possible. Legal action can be expensive. And even when your private landlord's insurance covers the costs court action still takes so much time and effort.
But you don't always have to go the legal route. And it's rare for private landlords to use the courts for deposit disputes. So let's look at the other options you have.
Reach a compromise or agreement
By far the quickest and possibly the most desirable way to resolve a dispute. Talking to the tenant face to face can help you both find common ground.
In cases of damage or cleaning, it may simply be a case of compromising on the cost. A tenant may acknowledge that damage has been caused but disagrees with the figure you claim it will cost to put things right. Reaching agreement on a lower figure may be an easy way to resolve the dispute. It may even be worth taking a slight hit on the cost just to move things on.
Resolving disputes with tenants takes time and energy. It's far better to get disputes resolved as quickly as possible so you can concentrate on moving in your next tenant. Reaching a mutual agreement speeds up the whole process. But if you can't agree on a compromise with your tenant you need to go to arbitration.
Alternative Dispute Resolution is a free service provided by your deposit protection company. Fortunately, most disputes are resolved before they reach this stage. MyDeposits claim only 1% of the deposits they protect require resolution by ADR.
Resolving a dispute by ADR is a simple four-step process.
1 File the dispute
Once the tenant contacts the deposit protection company you must send the disputed amount to the arbitrator. You should return any money, not in dispute with the tenant.
As an example, let's assume the deposit was £1,000 and you're claiming £450 for damages. You send £450 to the arbitrator and return the balance of £550 to the tenant.
The above applies to insurance based schemes. Custodial schemes operate in the same way. But in that case, it's the scheme itself which distributes the money.
2 Provide the evidence
As a private landlord, you must prove your case. Legally the deposit money belongs to the tenant so you have to prove you are entitled to it. You do this by supplying evidence. This should include:
- Your inventory.
- Before and after photographs.
- Estimates or invoices for repair or cleaning work.
- The tenancy agreement.
- Bank statements and other documentation if the dispute revolves around rent.
Your tenant too can provide evidence of their own.
3 The judgement
An independent arbitrator will weigh the evidence and make a decision. The arbitrator will notify you of their decision and the reasons for it. The judgement is binding and can't be appealed or taken further by either party.
4 Deposit money is returned
The deposit protection scheme will then distribute the disputed money according to the arbitrator’s judgement.
Whether you compromise or use ADR either process is preferable and less stressful than taking your tenant to court.
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