How to ensure your buy-to-let profits aren’t dented
Buy-to-let investment profits can be destroyed by tenants who walk away from a property owing more than their tenancy deposit. Especially if they have caused property damage that means a big maintenance and repair bill before the property can be re-let. Unfortunately, even the strictest tenant vetting procedure can miss a rare tenant from hell.
When tenants move on owing rent or leave a trail of destruction, it can be heartbreaking, stressful, and financially disastrous. In this article, we discuss a few strategies that will help you sleep at night and recover money owed to you.
Just forget about money owed
The tenancy deposit payment is there to protect you against tenants who fail to act as they should towards your buy-to-let investment. But you can’t simply hold money owed to you from the deposit when the tenant moves. The deposit belongs to the tenant. You need to agree on any deductions before they are made.
If the tenant disagrees the amount you want to deduct, they can dispute it through an alternative dispute resolution (ADR). It could lead to a long and drawn-out process of disputes and challenges. It may even go to court. You may need to appear before an adjudicator, and gather and present evidence to support your claim.
Before going through all of this, ask yourself if the amount you are claiming is worth the hassle. If the tenant disputes £50 or £100 for damage caused, might it be easier to simply forget about the money owed and move on?
Of course, you will make a note in your tenant file about what happened. Karma is a wonderful thing. Eventually, you’ll be asked to supply a reference for the tenant, and you’ll make certain the next landlord knows about the problem you had.
Negotiate a satisfactory deal
If your tenant left behind a bigger clean-up and repair bill on your buy-to-let property, you might need to negotiate. According to the Deposit Protection Scheme (DPS), the average tenancy deposit in England and Wales is £967.84. A month’s rent, professional cleaning and minor damage could take the total amount owed to more than the deposit lodged.
The key here is to let them know what amount is owed in total. It could be that the tenant then argues against this amount. In fact, it’s a distinct possibility. After all, they are expecting their tenancy deposit to be repaid. Now they are being asked to forego the deposit and stump up some more cash.
The tenant is likely to be angry. They may even get abusive. Your job is to cut through all this and get as much money as possible.
When conducting an exit inspection, make sure the tenant is with you. Take photos and videos, which can be used as evidence of damage left behind. Make sure this evidence can be compared easily to the property inventory made at the beginning of the tenancy. All of this should support your claim on the tenancy deposit. But you want more.
You have estimated support your demand, but do you need to go down the legal route? Do you want the time and financial cost of court proceedings? Let the tenant know you are prepared to present your case in court, and then be prepared to negotiate. Say the clean-up and repair work is set to cost £350 more than the tenancy deposit lodged. Isn’t a negotiated settlement of the tenancy deposit plus £200 a good middle ground? It is paid more quickly, there’s no animosity, and you get to move on faster. Your efforts are focused on finding a new tenant rather than battling against the last one.
Take the tenant to court to recover buy-to-let investment damage
If the cost of damage, missing items, cleaning and unpaid rent is substantial, you may have no option but to take the tenant to court. In a small claims court, present your evidence and sue them for the amount you say is owed to you. Make sure you avoid the screw-ups that destroy tenancy deposit claims.
If you win, the tenant will be ordered to pay what is owed. They will probably have to pay your legal costs, too. Perhaps as important, the judgement may show up on vetting checks made by future prospective landlords of the tenant – something the tenant may not be aware of, and which could help you in negotiating a settlement before going to court.
How to avoid tenancy deposit disputes when a tenancy ends
The following five steps will help avoid tenancy deposit disputes:
- Before the tenancy ends, remind the tenant of their responsibilities as detailed in the tenancy agreement.
- Ensure that the tenant is present at the end-of-tenancy property inspection. Note any comments and disagreements, and use these in your claim.
- Make sure that you consider fair wear and tear.
- Make sure you return any undisputed amount from the tenancy deposit immediately.
- Always discuss deductions you wish to make from the tenancy deposit as early as possible. Communication is the key to an effective solution.
In conclusion
In our experience, disputes over deductions from the tenancy deposit are rare. It is hard to argue against comprehensive property inventories and effective tenancy agreements. However, when they have occurred, and if the tenant has insisted on their day at court, the evidence provided by us is usually enough to recover disputed amounts in full.
Contact Ezytrac today on+44 01522 503 717, and benefit from our experience as investment property managers with a local approach but a national presence.
Yours in effortless property management,
Brett Alegre-Wood