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The stereotypes of grasping landlords and belligerent tenants are a long way from the truth. The private rental sector in the UK is generally harmonious with the vast majority of tenancies concluding trouble-free. 

If practical problems such as maintenance issues do arise, in the main, they are dealt with both quickly and fairly, in accordance with both the letter and the spirit of the contract with arguments settled in a way that satisfies both parties. 

However, that is not always the case.

One subject that does give rise to concern for both tenants and landlords is that of the deposit. 

Some tenants worry that landlords will find ways to withhold some or all of the deposit and there have been enough cases where this has happened to fuel that fear. 

Protection of deposits 

The National Association of Citizens Advice Bureaux (NACAB) published a report which illustrated the difficulties some tenants experienced in reclaiming their deposits from private landlords. 

Their report concluded that a system was urgently needed to protect deposits from abuse.

The Housing Act 2004 placed a duty on what it termed ‘the appropriate national authority’ to create a tenancy deposit protection (TDP) scheme and in April 2007 various TDP programmes came into effect. 

In relation to assured shorthold tenancies beginning after 6th April 2007, landlords in England and Wales were compelled by law to place tenants’ deposits in a TDP scheme approved by the government. 

They are also obliged to give the tenant information specified in the Act about how the deposit scheme works.

Two types of TDP plan were created – one custodial and the other insurance-based. 

There are now three providers with government approval: 

If the landlord fails to comply, then they can be fined and lose their right to serve a Section 21 eviction notice. Thanks largely to this legislative intervention, fewer than 1% of the nine million tenancies in England and Wales end in a dispute over deposits. 

Scotland and Northern Ireland have similar arrangements. 

Further provisions were introduced by the Tenant Fees Act 2019, which set a limit on the size of deposit landlords could demand from their tenants.

Statistic: 2021 4.2 million deposits were held in TDP schemes with a value of £4.35 billion (TDS)

Alternative Dispute Resolution (ADR)

When the tenancy comes to an end, if there is disagreement over how much of the deposit should be returned, then court action is available, but this is not the only option. 

Each TDP provider offers an alternative dispute resolution (ADR) service which is a form of mediation designed to reach a fair compromise between the parties in dispute. 

There has been criticism of some landlords who do not comply with their legal obligations and of the length of time it can take to resolve disputes. The current system is not perfect, but it is significantly better than the situation it was designed to correct.

Court versus Mediation

Going to court can be expensive. There are fees for bringing a claim as well as the costs of legal representation, which can mount up very quickly. 

Both the tenant and the landlord can end up spending considerably more money than the value of the claim, which suggests that this isn’t a sensible way to proceed. In relatively low-value civil cases of this kind, even solicitors will advise against court action. 

However, if the relationship between the landlord and tenant has soured to the point at which the chance of compromise seems impossible, the courts appear to offer the only way forward. 

Any financial disputes where the sum contested is below £10,000 qualify as small claims, but this doesn’t mean the process is necessarily less expensive than a larger claim. 

Moreover, while the judge has some discretion in awarding compensation and apportioning costs, it’s usually the loser who pays everything. 

According to the Small Claims Portal website; claimants can expect to pay the following costs: 

Deposit Disputes - The Cost of Going to Court

NB: Fees are subject to change; to keep up to date refer to the Fees in the Civil and Family Courts – main fees

It can be a huge gamble and whichever side you’re on, you really need to ask yourself if court action is proportionate.

Furthermore, if you do end up in court, the judge may decide that your dispute should have been dealt with by an ADR service. 

If so, they may automatically award costs against the claimant or prevent the claimant from applying for costs even if their claim is successful. 

This power is exercised in consideration of the Overriding Objective in the Civil Procedure Rules of England and Wales which states that “litigation should always be the last resort”.

Since you might be directed by the court to use mediation instead, it makes sense to pursue this avenue first. It has none of the risks of court proceedings and although it may not declare an outright winner, it is likely to achieve a resolution which both parties can live with. 

If you try mediation first, you are not obliged to accept the result and can still fight it out in court to reclaim or retain monies against the deposit if you really feel it’s worth it.

Wherever your dispute is heard, you will need to support your arguments with evidence. Property inspection reports and inventories are essential sources of the kind of evidence required. 

Every time the property is inspected, the findings of the inventory clerk are agreed between the landlord and tenant, creating documentary support for any issues central to the dispute. 

The property management software solutions provided by Inventory Base are designed to help inventory professionals, managing agents, tenants and landlords collate the evidence and therefore certainty around matters that may be relevant to the claim against the deposit.

Ultimately the choice is a matter for the two parties, but given the costs involved in going to court, the winner-takes-all nature of litigation and the chance of the judge sending the case to mediation anyway, it seems unwise to take such a risk.