Landlords, Win Your Tenancy Dispute
Whatever your feelings at the end of the tenancy, you may be worrying about the state of the property once it’s back in your possession
Whatever the situation, there’s often a mixed bag of emotions – often heightened by the concern of what you are going to find when the tenant leaves the property. Will it be immaculate? Will it be a state? Will you have drama with a deposit dispute and renovations to deal with before you can focus your attention on finding a new tenant?
On the Mashroom Landlord Community Facebook we often hear tales of woe from landlords who are up to their necks in end-of-tenancy trauma, and unsure of where to turn. But are there any simple steps you can take to simplify this process?
In this episode:
- We caught up with Lisa Williamson, senior partner at Independent Adjudication Services, to talk us through end of tenancy disputes, and how you can better handle them – or hopefully avoid them altogether!
- She explains the ever complex ‘fair wear and tear’ and why communication is key
- Siobhan Huston, Mashroom’s very own queen of customer service explains how some clever new tricks can help stop rumbling tenancy disputes in their tracks
What are the most common tenancy disputes?
We’ve all been there with an end of tenancy dispute. Whether it be a minor cleaning issue or a huge great hole in the wall, it’s rare that a property is going to be left perfect (after all, everyone is human)! Are there any common issues that you see time and time again?
According to Lisa, the top disputes are around:
- Cleanliness. Whether that might be the overall standard of cleanliness, of the cleanliness of kitchen appliances (especially the oven), or the standard of cleanliness of the carpets
- Damage. This could relate to the decor, furniture, fitted units, sanitaryware and so on
- What constitutes ‘fair wear and tear’. Both parties often hold widely different opinions!
With this in mind, is it wise to get independent advice from an adjudicator in the first instance to resolve an issue quickly?
‘I would say it’s always best in the first instance for landlords and tenants to try and resolve any disputes themselves and would urge both parties to negotiate and to be flexible,’ stressed Lisa.
If both parties can reach an amicable agreement, precious time is saved in having to prepare the required documentation for formal adjudication and the tenant stands to get the balance of their deposit returned far quicker.’
‘Both parties may need to take a step back and consider whether they can reach a compromise,’ added Lisa. ‘I would suggest that the landlord provides genuine quotes/estimates/receipts for any works they’ve had completed or for replacement items, including receipts for cleaning so that the tenant can see for themselves the actual costs incurred by the landlord.’
Preventing tenancy issues
Are there any steps a landlord can take at the start of a tenancy to prevent any headaches at the end?
‘A watertight tenancy agreement, professional signed inventory with good photographs, regular property visits, dealing with repairs promptly and trying to maintain a good rapport with the tenant,’ explained Lisa.
‘A professional inventory is a good idea, it is independent, unbiased, usually has high quality photographs and focuses on the condition and cleanliness of items. Many inventories compiled by landlords have poor quality photographs and no written descriptions, so it can be difficult for an adjudicator to accurately assess the condition and level of cleanliness of the property at the start of the tenancy.’
The inventory should be updated each time a new tenant moves in, and it is vital to either get them to sign it or else to prove that it was sent to them and that they were given seven days to advise the landlord of any discrepancies.
Does this need to be revisited at the end of the tenancy, upon checkout?
‘Yes, most definitely! And it’s worth noting that even if a landlord has prepared their own inventory, they can still instruct a professional inventory clerk to conduct the checkout report,’ said Lisa.
‘Naturally a landlord is going to be more biassed towards their property than an independent inventory clerk who will provide a detailed report with clear photographs to include close-up pictures of any dilapidations including cleanliness issues. Generally, adjudicators will give more credence to an independent checkout report and the inventory clerk’s findings and opinion regarding liability rather than that of the landlord.’
What is fair wear and tear?
Fair wear and tear is used all the time, but it’s a pretty confusing measure isn’t it? After all, who’s to say what’s fair… is there a definitive guide for this?
‘That age old question which is always so subjective!’ laughs Lisa.
‘A landlord must take into account the type of tenant they have allowed; it goes without saying that a property let to six students for a year will inevitably suffer more wear and tear than a property let to a couple of professional sharers. Similarly, a family with young children are likely to cause more wear and tear than a single person.’
‘The adjudicator will take into account the original condition of the property, the term of the tenancy, the type and number of occupants and the apparent quality of fixtures and fittings. A budget, foam backed carpet would only be expected to have a one-to-two-year life expectancy, whereas a higher quality carpet with underlay would be expected to last for four to five years.
‘Wear and tear is different to ‘damage’. If a carpet is worn to the central walkway this is generally regarded as wear and tear, but if the carpet is stained or has cigarette burns, this would be classed as damage and therefore the tenant would have some liability for compensation to the landlord,’ explained Lisa.
What is betterment?
‘The landlord must avoid ‘betterment’ which means that they cannot be in a better position at the end of the tenancy at the tenant’s expense than they were at the start,’ said Lisa.
‘I would say the most common example is where a landlord claims for the full cost of professional cleaning of a property, and yet the check in inventory proves that the property was only cleaned to a domestic standard at the start of the tenancy. Whilst the standard of cleanliness may have deteriorated, the landlord will only be awarded an amount which the adjudicator considers as fair and reasonable to reinstate the level of domestic cleaning presented at the start.’
‘Other examples include landlord’s wanting to charge for brand new carpets, full costs of redecoration, garden tidying etc, when the inventory confirms that these items/areas were not new or in good order at the start of the tenancy.’
OK, so in those cases a landlord may be awarded some costs, which would allow them to put the property back to the same condition it was in at the start of the original tenancy, but they wouldn’t be awarded costs to replace a ten-year old B&Q kitchen with a brand new, hand-made bespoke one, for example. Nothing to say they can’t pay the extra and out he beautiful kitchen in, but they can’t expect the outgoing tenant to cough up for it!
5 top tips for ending a tenancy on a high note
We don’t often think about the end of a tenancy at the start, but according to Lisa, that’s exactly what we should be doing if landlords want to safeguard themselves (and their tenants) from a whole heap of paperwork and hassle.
But here are 5 top top tips for keeping the end of a tenancy sweet:
- Don’t forget to carry out an inventory. Ideally, an independent inventory and checkout if possible
- Make sure to get the inventory signed! Get the tenant to sign within seven days of receipt, be sure to chase up!
- Pictures speak a thousand words. Make sure your inventory includes clear, high-quality photographs of all areas of the property
- Keep a paper trail. All documents should be filed, and follow up with emails if necessary
- Be fair with dilapidation costs. If they seem to be unrealistically high it’s inevitable that the tenant will dispute the claim
Taxing times ahead
We keep hearing how landlords are fleeing the market, and as such, there is a rental property supply crisis. Landlords are down, tenants are up and frankly, there’s not enough properties on the market to stem the flow. Good for the landlords left… on paper.
However, recent analysis by Capital Economics highlighted that a reinstatement of mortgage interest rate relief could add 110,000 properties to the market (and raise up to £400 million) which may balance out the playing fields once again.
This would be an about-turn on the introduction of the section 24 regulations, which were introduced by George Osbourne in 2015. They removed the landlord’s right to deduct mortgage interest from their rental income before calculating their tax liability, a highly controversial decision amongst the PRS at the time. The changes were bought in to help boost home ownership levels and put a dampener on the growth of the private rented sector.
The intention was to keep home ownership levels high and slow the growth of the private rental sector (PRS). Admirable in theory, after all, encouraging home ownership is a positive thing (generally speaking) however with the country’s finances as they are, home ownership is a distant dream for many, and the PRS is vital for thousands of households.
The research also uncovered data that revealed that if the base rate remains above 2.5% for the next four years (which has been predicted), around 735,000 more properties will become unprofitable, a further hit to the already strained market.
With landlords throwing in the towel, it will only mean one thing to tenants – increased rents as remaining properties become rarer than hen’s teeth – and there’s bad news for HMRC too, they’re looking at a loss of about £1 billion in landlord tax revenue.
What will happen next remains to be seen, but people are starting to stand up and make their voices heard on this matter. Over 40,000 people have signed a parliamentary petition calling for a reinstatement of mortgage interest relief, and with the potential hit in the government’s pocket looking inevitable, it will be interesting to see how it plays out…
Hope springs eternal for sellers
On a slightly more positive note, the appearance of the sun (finally) this month seems to have finally blown away the wintery cobwebs for anyone looking to sell their property.
Historically, early spring is the best time to start advertising your property for sale. The minute the first daffodils pop their heads up, people start to think about their next move. But, just like the warmer weather, for anyone looking to sell up, it has been a slow start to the year. However, according to Rightmove, May saw average asking prices creep up by 1.8% (around £6,650), a contrast to the frankly miserable predictions made at the start of the year, which had the UK housing market facing a 15% crash by mid-2024.
Tim Bannister, director of property science at Rightmove said:
One reason for this increased confidence may be that the gloomy start-of-the-year predictions for the market are looking increasingly unlikely.
Buyer demand was 3% higher in May 2023 than in May 2019 and, despite interest rate hikes, mortgage rates have been stable on a week-to-week basis.
It may have taken the sun a bit longer to pee through the clouds, gardens a bit longer to bloom (and hayfever a bit longer to come into force!), and flip flops a bit longer to make an appearance – but they all got there in the end. And it would seem the property market is working on the same basis. Fingers crossed for a long and prosperous summer with no more stormy times ahead!
Managing disputes is a hassle for any landlord, but Mashroom’s very own Siobhan Huston, who heads up our Customer Services team, tackles this challenge on a daily basis for thousands of landlords and tenants.
We caught up with her to get her take on what causes the biggest hiccups, why it can take so long, and if there are any tips or tools that can streamline the whole frustrating process!
‘What I have found to be the most common error that landlords tend to make is the lack of documentation, or even poor documentation,’ explained Siobhan (which sounds remarkably similar to Lisa’s words of wisdom, there’s a definite pattern emerging here about the need for paperwork)!
Everything that the deposit companies or the provider or even the adjudicator will ask for, if the landlord doesn’t have those kinds of documents, it lessens their chance of winning the claim, in essence.
A belt and braces approach
‘It is absolutely necessary to have a high-quality ingoing inventory at the start of the tenancy and also an outgoing checkout at the end of the tenancy. Without these documents it can be extremely difficult to determine what the condition of the property looked like,’ stressed Siobhan, echoing Lisa’s thoughts from earlier.
‘It’s also imperative to note that regarding an inventory, it must be signed by both parties, and it must also have a time and a date on there as well. Without these, it can be really difficult to establish that both parties were present at the inventory and the checkout and in actual fact that both of them were in agreement with each other.’
Of course, it’s something you can carry out on your own, but is there a benefit to handing it over to the professionals?
‘Here at Mashroom, you can purchase a professional inventory,’ explained Siobhan. If you were to purchase one with Mashroom, the kinds of things that you would expect to see is:
- The date of the inventory or checkout whichever is applicable
- Details of the inventory clerk
- The time of the report
- The date of the report
- Photographic schedule condition, detailed with description about each room, showing defects/damages/holes – absolutely everything within the property
- Meter readings, so the gas, the water, the electric readings
- Condition of the keys
Typically, at the very end of the report, you will also find a signed and dated declaration from any parties present at the inventory or the checkout.
‘It’s not mandatory to have these documents, however you need these documents in order to be able to make a claim at the end of the tenancy. Without these documents, or should I say with poor documents, so a poor inventory or a poor checkout, it can be really difficult for the adjudicator to find in favour of you.’
So, to be clear – whether you choose to carry out the paperwork yourself, or call in the professionals, one thing is for sure, having an in-depth inventory is key to protecting yourself further down the line!
The importance of property inspections
Proper paperwork at the start and end of a tenancy in the form of an inventory is a no-brainer, but don’t forget the bit in the middle…
Property inspections may not seem an obvious element to consider when thinking about smoothing the end of a tenancy, but Siobhan believes that they really are vital.
‘You don’t have to have them, but they are crucial to have. As a landlord, you should be protecting yourself at all costs,’ she explained.
In my experience, property inspections are really important because it gives the landlord opportunity to see any damage that has taken place from the start of the tenancy right up until the end of the tenancy, so they have that opportunity to do any repairs and any works before they get to a serious level.
One of the major frustrations we hear about, from landlords and tenants alike, is time it takes for deposit disputes to be rectified.
It is understandable from both landlord and tenant’s point of view that if they’re waiting on cash to be released, whether for repairs or arrears, or to use as another deposit, it’s super frustrating if the process seems to be dragging on! What exactly has to happen to release funds?
‘Typically when a tenant moves out, a landlord will come to Mashroom and instruct us to release the deposit on behalf of the tenant wherever they see that they request to release it in full. Some may be happy to give the full amount back to the tenant, or they may want to make a claim against the deposit for the partial or full amount,’ explained Siobhan.
‘We then have to go to MyDeposits and submit what we call a DRR, which is also known as a Deposit Release Request. We have to put the end of the tenancy date and exactly how much the landlord is wanting to claim for, and support that with evidence explaining whether it’s cleaning, redecoration, costs, rent arrears, unpaid bills.’
‘What then happens is that the DRR will be sent to the tenant who then has 14 days to respond. If the tenant does respond to the DRR, and they are in agreement with whatever’s on there, then MyDeposits will release the monies in accordance with that. If alternatively the tenant does not respond within the 14 days so they neither agree or disagree. It is a little bit more complicated then because it goes further into the dispute. What happens from there, is that we get notified with a statutory declaration form from MyDeposits. We then, on behalf of the landlord, take that statutory declaration form to either a solicitor, a commissioner of oath or a magistrates and get it signed. Only when it is signed can we send it back to MyDeposits, who then sends it back to the tenant who then has a further 14 days to respond.’
‘Again, if the tenant does agree, if they don’t or if they simply don’t react to the 14 days – it’s a very complicated situation! What works for one landlord and tenant might not work for another, it’s really not a simple straightforward case. And it’s certainly not as easy as the landlord saying to Mashroom ‘Hi, can you release £250 for me?’ There’s a whole process that has to be adhered to ourselves, by the landlord and by the tenant. And obviously with that there’s time constraints that we have to follow and adhere to.’
Ah, so not quite as simple as it may seem – even with all the protective paperwork in place! Is that process just the case with a traditional deposit though? There are alternatives available at Mashroom, are they less time-intensive?
‘We do offer two options here at Mashroom. The tenant can either pay the traditional deposit, which we know as the five-week cash deposit, which by law has to be protected and registered within a deposit scheme. Second to that we also do offer the Mashroom Deposit Replacement product also known as the DRP. This is an alternative to the traditional deposit, where the tenant doesn’t pay a five week cash deposit per se. And instead what this is, is it’s a scheme whereby we provide up to twelve weeks’ worth of protection to the landlord at the end of the contract if they were to make a claim however, you know, the claim still have to go through adjudication, it still has to go through the correct channels as if it were a traditional type deposit,’ explained Siobhan.
The next episode of the Mashroom Show is airing on Friday the 16th June, and we’ll be joined by Monica Bradley, company director of MB Associates, who’s going to be looking at life insurance, and how to make it as tax efficient as possible.
In the meantime, why not head on over to Facebook and join the Mashroom Landlord Community Facebook page. There are over 7,000 landlords regularly chatting, sharing queries and questions and engaging with industry experts, so it’s a great place to have a chat about what’s on your mind, and get some great advice.