#AskTDS: What can I use my tenant’s deposit for?

In this week’s #AskTDS, we answer a common question from landlords; “what can I use my tenant’s deposit for?”

What can I deduct from the deposit?

The deposit is the tenant’s money and should only be kept if you have suffered financial loss. Reasonable deductions could include:

  • Cleaning
  • Damage
  • Redecoration
  • Missing items
  • Gardening
  • Rent arrears
  • Unpaid utilities

Why you must include a deposit use clause in your tenancy agreement

Most deposit deductions are agreed between the tenant and landlord without the need of TDS’s dispute resolution service. However, if it does result in a dispute, the adjudicator will start by looking at the deposit use clause or deposit clause.

If there is no deposit use clause, it is unlikely the adjudicator will make an award to the landlord. Therefore, it is essential you include one.

Many free online tenancy agreement templates do not include a deposit use clause, so make sure you check before using one.

What should a deposit use clause include?

A good deposit use clause will outline what the tenancy deposit can be used for. Therefore, it is essential you think about what you may want to use the deposit for at the end of the tenancy. This is likely to include cleaning, damage, missing items, gardening, redecoration, outstanding rent and unpaid utilities.

Our guide to Prescribed Information and Clauses provides an example deposit use clause for landlords to use as a starting point in their tenancy agreement.

How much can I take from the deposit?

You should only charge a reasonable amount from the deposit and you should provide evidence of the costs you incurred.

If you are charging for damaged items, you should account for reasonable amounts of wear and tear. For example, if your tenant damaged your carpet after living in the property for five years, you would not be able to charge them for the cost of a brand-new carpet.

We have a guide to product lifespans available for landlords to help you understand how adjudicators factor in wear and tear.

What other clauses should I include in my tenancy agreement?

In certain circumstances you may wish to add unique clauses to a tenancy agreement.

For example, if you have agreed that the tenants may keep a pet in the property you might want to add a clause stating you can use the deposit for any damage caused by the tenant’s pet.

You might even want to name the pet in tenancy agreement, quantifying that this is the only pet allowed to live at the property. This prevents you agreeing to one dog, and later discovering that the tenant also had 3 cats and a gerbil!

Our guide to Prescribed Information and Clauses includes example clauses you may also want to include in your tenancy agreement.

Remember, you can only make a deduction from the deposit if you have suffered financial loss. You must also make sure you include a deposit use clause in the deposit, otherwise if you end up in a dispute the adjudicator may not be able to make you an award.

For more essential landlord tips please view our landlord FAQ page.

About TDS

Tenancy Deposit Scheme (TDS) is a government-approved scheme for the protection of tenancy deposits; TDS offers both Insured and Custodial protection and also provides fair adjudication for disputes that arise over the tenancy deposits that we protect.

We provide invaluable training in tenancy deposit protection and disputes for agents and landlords through the TDS Academy as well as joining with MOL to provide the Technical Award in Residential Tenancy Deposits.

TDS Insured Scheme: where a TDS member can hold the tenancy deposits as stakeholder during the term of the tenancy.

TDS Custodial Scheme: where TDS hold the deposit for the duration of the tenancy.

TDS Academy: TDS provides property professionals with invaluable training in tenancy deposit protection and tenancy deposit disputes.

TDS Northern Ireland: TDS is Northern Ireland’s leading and only not for profit tenancy deposit protection scheme.

TDS can only comment on the process for our scheme, other deposit protection schemes may have a different process/require different steps. Content is correct at the time of writing.

These views are those of the author alone and do not necessarily reflect the view of TDS, its officers and employees.

ARLA|Propertymark: For agents who would like to stay up to date, you can contact Propertymark | ARLA at: join@propertymark.com. By being a member of Propertymark | ARLA you will be eligible for TDS Insured best headline rates.

RLA: If you are a landlord and would like to keep up to date with any changes that may affect you or your responsibilities, you can contact the RLA at: info@rla.org.uk and quote reference: dg715 to receive 25% off your first year’s membership.