Ask TDS: My tenants haven’t paid rent since I gave them notice. Can I recover these costs from their deposits?

The Tenancy Deposit Scheme (TDS) is a government approved scheme for the protection of tenancy deposits; we offer both insured and custodial protection. We also provide fair adjudication for disputes that arise over the tenancy deposits that we protect. This article has been written in response to a landlord’s query: “My tenants haven’t paid rent since I gave them notice. Can I recover these costs from their deposits?”

When it comes to paying rent, it can be misunderstood that the last month’s rent is covered by the deposit. Outstanding rent should be pursued, as assuming that the deposit will cover this could leave the landlord out of pocket later on.

I’ve always allowed a tenant to skip the last month of rent while I retained their deposit - why should I change this now?

The deposit is taken to protect the landlord’s interest – the property. If a tenant’s deposit is equal to one month’s rent it may seem sensible to keep one to forego the other – but this can leave the landlord high and dry if something were to go wrong.

In this example the rent is £750 and so is the deposit. The landlord allows the tenants not to pay the last month’s rent on the condition that the landlord is able to keep the deposit instead. Once the tenants move out, the landlord visits the property and realises that there is a lot of damage to repair and redecoration needed if they hope to be able to rent the property out again. The estimate for all the work is £600. Since the landlord has already accepted the deposit in lieu of rent, this now leaves them unable to seek the damage and redecoration costs from the deposit.

In this case the alternative dispute resolution (ADR) service, which is offered for free from all of the tenancy deposit schemes, would be unable to help the landlord to recover these costs as they can only adjudicate over the deposit – which in the above case has already been used in full. The landlord would either need to pursue the tenant through the courts (after seeking legal advice) or absorb the cost of redecoration and repairing the damage themselves.

My tenants have lost their jobs and can’t afford the rent. They’ve asked to break the contract early to move back in with family – which I allowed but they disappeared without paying rent.

Once the tenants have left and you have completed a check-out report you can then decide if there are any other costs you need to consider. If there is no damage, missing items, etc, then with the only cost being the missing rent you can easily cover this cost with the deposit – you would not need to use ADR in this case. Ensure that your tenancy agreement clearly states that you are allowed to use the deposit for this purpose. If you are using the custodial scheme you will need to submit a statutory declaration in order to retrieve the deposit.

While it may seem like a simple solution to rent issues, automatically using the deposit against rent can cause issues for landlords later on. Always ensure you have accounted for any additional costs and ensure that you tenancy agreement allows you to recover these costs from the deposit. At present, there is no cap on the amount of deposit you can take in England and Wales, and it is common for landlords and agents take between six weeks and 2 months’ deposit.

Similar blogs you may find useful:

Posted by Zoe Knighton on 11 May 2017

Back to Blog Articles