Beyond dispute

Unearthing rogue landlords is becoming a virtual witch-hunt, but the scourge of nightmare tenants should not be underestimated, which is why a rental deposit protection scheme could benefit both parties in a tenancy.

Such a scheme has been operational in the UK since 2007 and in Jersey since 2015. Citizens Advice Guernsey is now campaigning to make it compulsory here, following an increasing number of tenants seeking advice about rental deposit disputes.

A Guernsey scheme would probably follow the provisions of Jersey’s 2014 legislation, a government-authorised strategy of safeguarding tenants’ deposits and regulating their return at the end of a tenancy, although the process in most cases takes materially longer than when landlords repay tenants directly.

The Caesarean scheme is administered by My Deposits Jersey, the trading name of a UK company jointly owned by the National Landlords Association and Hamilton Fraser Insurance.

Landlords (or their letting agents) must lodge a tenant’s deposit with the deposit holder within 30 days of receipt, or face a fine. In return both the landlord and tenant receive a Deposit Protection Certificate setting out the amount paid, the repayment process and what to do if there is a dispute at the end of the tenancy.

Landlords join the scheme for free, however there is a charge of £20 for lodging each deposit, which is deducted from the tenant’s down payment.

Either party may apply for its release at the end of a tenancy, with the proviso that both parties must agree. In the event of a dispute about the amount of any deductions, the parties can agree (but are not obliged) to use free of charge the scheme’s Alternative Dispute Resolution Service, and the case is referred to an independent adjudicator. The adjudicator’s decision is binding, unless an error of fact or law causes a review, which in turn will be final and binding.

Adjudication presupposes that the deposit legitimately belongs to the tenant and the onus is on the landlord to prove a claim for deductions. If the evidence is not strong enough, the adjudicator has no option but to award the deposit to the tenant. Disputes are not always the fault of obstinate landlords, however – they might equally stem from a tenant’s unawareness or misinterpretation of the lease or tenancy agreement. Actions such as randomly moving furniture to cover damage is unacceptable, or dabbing defaced paintwork with a different shade of emulsion. I could continue – the list is long.

Official annual figures taken nationwide between 2012 and 2019 show cleaning, damage and redecoration as the principal reasons for dispute and, in truth, Guernsey’s levels of cleanliness in rental properties appear arbitrary at times, as are the vagaries of fair wear and tear.

Landlords and letting agents take note. The process of resolving, if not avoiding, deposit disputes begins before a tenant moves in, not at the end of a tenancy. Inventories should include room-by-room comments on the state of repair, good and bad, backed by counter-signed and dated photographs and, if subsequently required, relevant receipts and invoices for decoration, repairs and replacements prior to and during the tenancy.

The role of an adjudicator is to decide, using proof provided by both landlords and tenants, if the tenancy agreement has been breached. Adjudicators do not visit the property so landlords have the responsibility of persuading the adjudicator ‘on a balance of probabilities’ that they have suffered, or are likely to suffer, a loss as a result. At least using an impartial adjudicator to verify what is and isn’t acceptable helps to alleviate contention between the parties and applies benchmarks for the industry as a whole.

Fair wear and tear, for example, should relate to deterioration normally expected in a rental property over a period of time, taking into account the age of the item or decor, its expected lifespan, the condition at the start of the tenancy, the length of the tenancy and the number of tenants.

This is akin to the depreciation scale much beloved of insurance companies when dealing with household claims. Not to be taken as gospel, but a recently published assessment noted household depreciations as white goods having a lifespan of between three and eight years; decoration between two and six years, depending on the room’s use, and carpets three to 18 years, depending on their quality and use.

In the case of a five-year-old carpet, for example, an errant tenant may be liable for the reduction in its value, but not its replacement. Landlords could defer to their insurance policies, but who then picks up the excess tab? Furthermore, the adjudicator will only rule on the amount of the deposit. Any additional claims a landlord has against the tenant have to be actioned through the Petty Debt court, at the landlord’s expense. This begins to show partiality towards the tenant.

Neither is there any recourse for landlords in a deposit protection scheme against tenants who do not pay the final month’s rent, claiming in contravention of final demands and the terms of most tenancy agreements that it can be taken from the deposit instead. This contemptible practice will cause landlords in future to insist upon higher deposits or rents paid quarterly in advance. The latter would allow sufficient time to commence Petty Debt proceedings for breach of contract. In such cases, if court proceedings are pending, this will lawfully prevent the deposit holder from releasing the tenant’s deposit.

Such is the furore at times that some UK landlords have decided not to take deposits, choosing instead to increase the monthly rent pro rata to offset potential damages, which discriminates against good tenants.

In aiming to derail the very few local rogue landlords, and regrettably there are some, officialdom must handle this equitably and not pamper to those few tenants who are capable of bringing their alleged woes upon themselves.