How to avoid deposit disputes and reduce your tax
Buy-to-let landlords often find themselves in hot water when disputing the amount of deposit to be returned at the end of a tenancy. The amount they claim should be retained is poles apart from the amount the tenant believes should be deducted.
The major cause of deposit disputes is the misunderstanding of the difference between wear and tear and damage. The landlord claims damage, but the tenant claims wear and tear. In most cases, an independent adjudicator rules in favour of the tenant.
In this article, you’ll learn the difference between wear and tear and property damage. Armed with this knowledge, should your claim on a tenant’s deposit be taken to arbitration, you should add to the 8% of landlords who win deposit disputes.
What is normal wear and tear?
UK law states that you can charge your tenant for damage, but not for normal wear and tear. But the law doesn’t detail what should be considered as normal wear and tear. Fortunately, buy-to-let landlords are given some guidance by the Association of Independent Inventory Clerks. The rule of thumb is that wear and tear is caused by ‘reasonable use of the premises and the ordinary operation of natural forces’.
“What?” I hear you exclaim. In layman’s terms, you can’t charge the tenant for damage that is caused simply by living in the property. For example, over time a carpet will become scuffed and worn as people walk over it. However, what you wouldn’t expect to see is burn marks caused by dropped cigarettes. The former is wear and tear, the latter is damage.
More examples of wear and tear vs. damage
Many of the disputes between landlords and tenants at the end of a tenancy centre on decoration and cleaning.
- Often, landlords expect their tenant to repaint their property when they leave after a long tenancy. In law, you could be on shaky ground. The tenant may feel that scuff marks, handprints, and holes made by drawing pins are normal wear and tear. An independent adjudicator may agree.
- On the other hand, if the tenant has repainted in a garish colour, without first obtaining the landlord’s agreement, this would be classed as damage. If this happens to you, you are at liberty to retain the cost of repainting.
- In the garden, wear and tear occur to a lawn because of weather and footfall. Damage caused by trampolines, sports equipment, and pets’ toilet areas wouldn’t be classed as wear and tear.
- Dirty windows, perhaps with kids’ handprints on the inside and a build-up of moss and grime on the outside, are no more than wear and tear – the effects of everyday life and time on glass and frames. On the other hand, a cracked or broken window would be deemed as damage.
- Where curtains are faded, the sun has done the damage – this is normal wear and tear. But if they are torn or missing, this is damage caused by the tenant.
Here are a few more examples of wear and tear vs. damage in brief:
| Wear and Tear | Damage by Tenant |
| Loose locks | Broken lock |
| Worn or dirty carpets | Burn marks, stains and rips in carpets |
| Scuffed wooden floors | Gouges, scratches, and missing floorboards |
| Loose door handles | Broken handles |
Two rules of wear and tear
When considering whether its wear and tear or damage, there are two rules to guide you.
The first is that your tenant has a duty of care to make sure your property is left in the condition it was first occupied. This is why you should ensure that you avoid the common property inventory mistakes that buy-to-let landlords make. Your property inventory, especially when accompanied by videos and photos, will be indisputable evidence that burn marks in carpets didn’t exist when the tenant first moved in.
The second rule is that you can’t replace an item with a newer or better item, after allowing for wear and tear. If the carpet was two years old when the tenant moved in, even if there is damage caused by the tenant you can’t replace it with new and expect the tenant to pay.
Cleaning is NOT wear and tear
Cleaning is not, and never will be, an issue of wear and tear. If the tenant leaves a property dirty, you will be able to charge for a professional clean. Again, however, it’s worth collecting photographic or video evidence (at the beginning and end of a tenancy).
What is the wear and tear allowance?
While you can’t charge for wear and tear, you are allowed to deduct from your rental income as a cost of business. However, the amount and way you can claim have changed. You used to be able to claim 10% of rent as a wear and tear allowance. Now, you may only claim what you have actually spent.
To offset your wear and tear maintenance costs against your rental income, you must keep all your receipts. You can also claim for the cost of disposing of any items, though if you sell any items you must deduct this from your maintenance costs. While this will increase the level of paperwork needed, it does mean that there are no complex calculations to make.
The important takeaways
There will be occasions when a buy-to-let landlord needs to make a deduction from a tenant’s deposit. However, the tenant is likely to dispute the amount. To reduce this possibility, you should:
- Ensure that you produce a comprehensive property inventory at check-in, and have your tenant sign it
- Conduct regular and effective property inspections
- Know the difference between normal wear and tear and damage
- Always keep your receipts and claim all maintenance costs when completing tax returns
- Make sure your tenancy agreement includes clauses that detail tenant responsibilities
Are you claiming your full maintenance entitlement? Do you have difficulty keeping track of paperwork and costs? Contact one of the Ezytrac team today on +44 01522 503 717, and discover how Ezytrac takes the strain out of managing a property portfolio.
Yours in effortless property management,
Brett Alegre-Wood MARLA MNAEA