Law guide: Landlords

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Returning the tenancy deposit

Returning the tenancy deposit

Contents

At the end of the tenancy, the deposit will need to be returned to the tenant unless there are reasons for the landlord to claim it, for example if there is rent outstanding or the tenant has damaged the property. The grounds for keeping all or part of the deposit should be specified in the agreement. The type of scheme used and the deposit scheme rules determine the procedure for returning the deposit. There are two types of deposit scheme – custodial and insured – each with different rules about what happens to the deposit if there is a dispute. See Registering the deposit for more information on the different types of schemes.

The deposit schemes also offer a dispute resolution service for deciding any disputes between the landlord and tenant, but both of you must agree to use that service. Alternatively the matter can be decided by the courts.

England, Wales and Northern Ireland

You (or your agent) must try to agree with the tenant the amount of the deposit to be returned and whether part of it is to be kept for any reasons allowed by the tenancy agreement.

In a custodial scheme, if an agreement is reached about how the deposit should be divided at the end of the tenancy, the scheme will return the deposit in the manner agreed. However, if there is a dispute, the scheme will hold the deposit until the dispute resolution service or courts decide what should happen to it. Meanwhile, until the matter is resolved, the interest accrued will be used to pay for the running of the scheme with any surplus going to the tenant or landlord, depending on who is entitled to the deposit.

In an insured scheme you or your agent should return all or some of the deposit (as agreed) within 10 working days of the end of the tenancy. However, if there's a dispute about the amount to be returned, you (or your agent) must hand over the disputed amount to the deposit scheme for safekeeping until the dispute is resolved. If you don't do this, the scheme's insurance arrangements will ensure the return of the deposit to the tenant (if they're entitled to it).

Disputes

A free dispute resolution service is offered by the tenancy deposit schemes. Landlords and tenants do not need to use this and are free to negotiate matters between themselves or start court proceedings. In England & Wales in order for the dispute resolution service to be used, both parties must agree to do so, while in Northern Ireland if the tenant decides to use the scheme the landlord must as well.

Disputes will be determined by an independent adjudicator within 28 days on the basis of the evidence submitted to them. Both parties can submit evidence to the adjudicator. Once the adjudicator has come to a decision, they will notify the landlord, tenant and scheme provider. The scheme will then pay the disputed amount in accordance with the adjudicator's decision within 10 working days.

You should check the scheme rules for the detail of the procedure you need to follow in dealing with the deposit at the end of the tenancy.

Review of adjudicator's decision (Northern Ireland only)

In Northern Ireland either party can ask for a review of the adjudicator's decision within 10 working days of being told of the decision. They can only request a review on the basis that the adjudicator made an error of law or failed to properly consider the evidence, but not on the basis that they disagree with the decision. The adjudicator's reviewed decision is final.

Scotland

You should apply to the scheme provider for the return of the deposit as soon as possible after the tenancy has ended (stating the amount to be returned to the tenant). When the scheme provider receives the application, they'll contact the tenant to find out if they agree with the amount to be returned.

The tenant should respond to the scheme provider within 30 days; they can:

  • agree with the figure; or
  • state what figure they believe should instead be paid.

If a tenant doesn't respond within 30 days, the scheme will repay the amounts owed to each party (based on the landlord's application).

Dispute resolution service

You and the tenant are free to agree between you the amount to be repaid. If you're unable to agree, the tenancy deposit schemes offer a dispute resolution service (that's free to access). Usually the tenant will be the one making a request to use this service. If they do, you must cooperate with the dispute resolution service. Alternatively, if an agreement cannot be reached, you can apply, but you won't have the option to go to court instead.

The tenant will have 30 days to request dispute resolution. If the tenant doesn't respond, or if the tenant chooses to go to court instead, the scheme will return the amounts owed to each party (based on the landlord's application).

If the dispute resolution service is used:

  • An independent adjudicator will make a decision
  • The landlord, tenant and scheme provider will be informed of the decision

Review of the adjudicator's decision

The adjudicator's decision can only be reviewed once, and only on the grounds that the adjudicator has made an error in fact or in law. The adjudicator will then review their decision within 5 working days and inform the parties. This decision is final and can't be reviewed.

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