Steps to Take If a Nightmare Tenant Leaves Owing You Money
A tenancy deposit is an amount of money held to cover unpaid rent, property damage, cleaning or unpaid bills when the tenant leaves your property. By law, it must be held in a tenancy deposit scheme.
There are rules that dictate how you can treat the tenancy deposit at the end of a tenancy. But what should you do if the deposit doesn’t cover damage caused by the tenant or the rent that they haven’t paid to you?
Don’t Be Shy of Asking for Cash from the Tenancy Deposit Scheme
First things first. If there is damage or unpaid rent, then you must request to be compensated from the tenancy deposit. You’ll help your cause by maintaining good records (such as the property inventory).
Write to the tenant, explain the situation and the amount you are claiming, and what this amount covers.
What Happens If the Tenant Disputes Your Claim?
If all your paperwork is in order, it is unlikely that your tenant will dispute your claim. However, disputes do happen. If this is the case, you have two courses of action you could take:
- Take the dispute to the Alternative Dispute Resolution Service
- Take the tenant to court
The Alternative Dispute Resolution Service
The Alternative Dispute Resolution Service (ADRS) is encouraged by tenancy deposit schemes. To use this, both you and the tenant must agree to use it.
An adjudicator hears the case put by you and your tenant, and reviews all evidence put before them. It is easier and faster than going to court. The service is provided at no cost.
If you do use an ADR agency, the judgement made is binding – you cannot then take the tenant to court.
The steps in the ADR process are:
- The dispute is initiated.
- Submit your evidence within 14 days (this includes the tenancy agreement; check-in/out reports; property inventories; etc.).
- The tenant makes their response, within 14 days.
- The case is reviewed, and you will be given seven more days to provide further evidence.
- The ADR service provides a decision within 28 days.
- Money is distributed – to you, the tenant, or both, as per the adjudication decision.
Taking the tenant to court
If you intend to take the tenant to court, you’ll need to balance the cost of doing so (and consider the time and effort it takes, too) with the amount of money you are likely to receive.
If you do take the tenant to court, the Tenancy Deposit Scheme will hold the disputed deposit until a decision is reached by the court.
If this is the route you wish to take to resolve a dispute, you will need to let the Tenancy Deposit Scheme know of your decision when you raise the dispute. They will let the tenant know, though it is also advisable to inform the tenant through your solicitor.
You must then use the court to issue court proceedings. If you don’t do this within six months, the Tenancy Deposit Scheme can distribute the tenancy deposit to your tenant.
When deciding whether to take your tenant to court, consider that:
- It is a time-consuming process
You will need to prepare well. You will need to gather all the evidence to support your claim, attend hearings in the town where your property is located, and liaise with your solicitor.
- It can be costly
Usually, a claim under £10,000 will be heard in the small claims court. There is something you must know about this: your legal costs are unlikely to be awarded to you with this size of claim.
Even though going to a small claims court, the Pre-action process attempts to resolve the dispute out of court.
- You might not get what you are owed
If your tenant is broke, you won’t be able to collect what the judgement awards you.
The good news is that excessive damage to property or unpaid rent is very rare. The best way to help protect yourself from either situation is to:
- Vet prospective tenants effectively.
- Ensure that your property inventory is comprehensive, complete, and signed by the tenant.
- Conduct regular property inspections so that damage is repaired and paid for when it occurs.
- Ensure that the check-out process is done with the tenant and comparison made to the property inventory.
- Never allow the tenant to fall into rent arrears.
The ADR and small claims courts are processes to help protect you against potential losses. Though no action can guarantee that damage or unpaid rent won’t occur, the five actions outlined here will help to reduce this risk to the minimum – helping you to sleep soundly.
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