Deposit Deductions: A Guide for Relocated Employees

Deposit deductions often cause confusion and concern among tenants and working expats unfamiliar with the process in the UK. When renting a property, tenants typically pay a security deposit at the beginning of their tenancy. This deposit serves as a financial safeguard for landlords against potential damages or unpaid rent. However, tenants need to understand the specific circumstances under which landlords can legally make deductions from this deposit at the end of the tenancy.

Knowing your rights and responsibilities can help prevent wrongful deductions and disputes and ensure a fair and stress-free conclusion to your rental agreement before your repatriation or next assignment. This guide outlines the legitimate reasons for deposit deductions, what landlords cannot deduct, and practical steps tenants can take to protect their deposits.

Legitimate Deposit Deductions

What can a landlord take from my security deposit? Landlords cannot make arbitrary deductions from your security deposit; there are strict guidelines and legislation in place to prevent unfair deductions. This is particularly important for employees and expats who have relocated to the UK and may be unfamiliar with the local rental practices. Landlords can make deductions from your security deposit for the following reasons:

1. Unpaid rent: If you have any unpaid rent at the end of your tenancy, your landlord can deduct this amount from your deposit.
2. Unpaid bills: If utility bills are in the landlord’s name and you leave without paying, the landlord may deduct these costs from your deposit. However, if the bills are in your name, the landlord is not permitted to deduct these costs as the debt follows you, not the property.
3. Damage to the property: Deposit deductions can be made for any damage beyond normal wear and tear. This might include broken furniture or fixtures, holes in walls, or carpet stains, for example.
4. Cleaning costs: If you leave the property in a dirtier state than when you moved in, the landlord can deduct cleaning costs. However, this is only to bring the property back to the same standard of cleanliness as at the start of the tenancy, not necessarily to a professional standard.
5. Missing items: If any items listed in the inventory are missing when you move out, the landlord can make a deposit deduction to cover the costs of replacing them.
6. Gardening: If the tenancy agreement requires you to maintain the garden and you fail to do so, the landlord may deduct costs for necessary gardening work.
7. Redecoration: If you’ve redecorated without permission or in a way that breaches your tenancy agreement, the landlord may make a deposit deduction to restore the property to its original state.
8. Breaking the tenancy agreement: If you’ve breached other terms of your tenancy agreement, such as subletting without permission, the landlord may make deductions to cover any resulting costs.

Improper Deposit Deductions

It’s equally important for relocated employees and expats to understand what landlords cannot deduct from your deposit:

1. Normal (fair) wear and tear: Fair wear and tear means changes to a property because of normal everyday living. This includes minor scuffs on walls and floors, worn carpets, faded paint or wallpaper, for example.
2. Pre-existing damage: Landlords cannot make a deposit deduction for damages that were present before you moved in.
3. Routine maintenance: Repairs that are the landlord’s responsibility, such as fixing plumbing issues or repairing appliances due to regular wear and tear.
4. Preparation for next tenancy: Costs related to re-letting the property or upgrading it for the next tenants cannot be deducted from your deposit.
5. Utility bills in tenant’s name: If utility accounts are in your name, any unpaid bills cannot be deducted from your deposit as the debt follows you, not the property.

If carpets, furniture, or appliances are beyond repair or cleaning, your landlord is usually not permitted to charge the full cost of replacement. Instead, they should only charge for the depreciated value of the item.

Calculating Depreciated Values for Deposit Deductions

The depreciated value of an item is the value of the item after accounting for depreciation, which is the reduction in value due to factors such as wear and tear, age, and obsolescence over time.

Example: Depreciating a Bedroom Carpet

Suppose the rental property has a bedroom carpet with a lifespan of 8 years, and the cost of the carpet, including fitting, was £600 two years ago. Due to the level of damage to the carpet, the landlord needs to replace it entirely. To calculate how much the tenant would need to pay from their deposit after a two-year tenancy, we will use the straight-line depreciation method.

straight-line depreciation

1. Determine useful life: The carpet has a useful life of 8 years.
2. Annual depreciation expense: Divide the initial cost by the useful life.
   • Annual depreciation expense = £600 ÷ 8 ​= £75
3. Depreciated value each year:
   • End of Y1: Depreciated value = £600 − £75 = £525
   • End of Y2: Depreciated value = £525 − £75 = £450
   • End of Y3: Depreciated value = £450 − £75 = £375
   • End of Y4: Depreciated value = £375 − £75 = £300
   • End of Y5: Depreciated value = £300 − £75 = £225
   • End of Y6: Depreciated value = £225 − £75 = £150
   • End of Y7: Depreciated value = £150 − £75 = £75
   • End of Y8: Depreciated value = £75 − £75 = £0

Calculation for Tenant’s Responsibility

The carpet was already 2 years old when the tenant moved in. Therefore, its value at the start of the tenancy was:

Depreciated value at start of tenancy = £600 − (2×£75) = £450

After the 2-year tenancy, the carpet would be 4 years old. Therefore, its value at the end of the tenancy would be:

Depreciated value at end of tenancy = £450 − (2×£75) = £300

Since the landlord needs to replace the carpet entirely due to the damage, the tenant is responsible for the depreciated value lost during their tenancy. This amount is the difference between the carpet’s value at the start and end of the tenancy:

Tenant’s responsibility = depreciated value at start of tenancy − depreciated value at end of tenancy

Tenant’s responsibility = £450 − £300 = £150

Amount of Deposit Deduction

Therefore, in this example, the tenant would need to pay £150 from their deposit to cover the cost of the carpet replacement.

Minimising the Risk of Deposit Deductions

To ensure you receive your full deposit back, or as much of it as you should, consider these steps:

1. Schedule of condition: Conduct a thorough inventory check at the start of your tenancy, documenting the condition of the property and its contents, along with photographs.
2. Report damages: Report any damages or issues to your landlord promptly during your tenancy.
3. Thorough cleaning: Clean the property thoroughly before moving out, aiming to leave it in the same condition as when you moved in.
4. End of tenancy: Conduct a thorough inventory check at the end of your tenancy, documenting the condition of the property and its contents, along with photographs.
5. Settle bills: Ensure all rent and bills in your name are paid up to date before moving out.
6. Your obligations: Review your tenancy agreement to understand your responsibilities regarding utilities, gardening, and other maintenance tasks.

Disputing Unfair Deposit Deductions

If you believe your landlord has made unfair deposit deductions, you have the right to challenge them. In most cases (if your tenancy is an Assured Shorthold Tenancy), your deposit should be protected by a government-approved tenancy deposit scheme, which offers a free dispute resolution service. To initiate a dispute:

1. Contact your landlord or letting agent first to try and resolve the issue.
2. If unsuccessful, contact the tenancy deposit scheme where your deposit is protected.
3. You will need to provide evidence to support your case, such as inventory reports, photographs, and correspondence with your landlord.

Remember, landlords must provide evidence to justify any deposit deductions they make. If they fail to do so, or if the adjudicator finds in your favour, you should receive the disputed amount back.

Note that there are different tenancy deposit schemes for England & Wales, Scotland and Ireland.

Case Studies

To gain a deeper understanding of deposit disputes and their resolutions, it’s highly beneficial to review real-world case studies. These practical examples can provide valuable insights into how deposit protection schemes interpret various situations and apply regulations. You can access case studies at the TDS, mydeposits and DPS.

Final Thoughts on Deposit Deductions

Understanding deposit deductions is essential for any tenant or relocated worker in the UK. By being aware of what constitutes legitimate and illegitimate deductions, tenants can better protect their financial interests and avoid unnecessary disputes with their landlords.

Ensuring a thorough inventory check at the start of the tenancy, maintaining open communication with the landlord, and leaving the property in good condition are key steps in safeguarding your deposit. If disputes arise, tenants have the right to seek resolution through government-approved tenancy deposit schemes.

By staying informed and proactive, tenants can navigate the end of their tenancy with confidence and ensure they receive their rightful deposit return.

Speak to one of our experts or send a message today and find out how we can add value to your relocation programme.