Property rent deposit query

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johnsmithhp

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Hi, I’m a landlord looking for some advice on my tenant’s deposit. The tenants have been renting in my property since August last year (agency contract) and we renewed the 1 year contract this year (without use of an agency) to last through to July 2021. However, they just gave approx 5 weeks notice that they are moving out mid December (since they can work from home and no longer need the location).

I’ve had no issues with them, they’ve paid on time and kept the place well etc but I’m wondering how to handle the deposit. The RTB say that breaking a fixed term contract is one of the reasons some or all of a deposit can be withheld but legislation doesn’t say how much can be withheld i.e. I could withhold whatever amount I deem appropriate and they could challenge it if they wish.

As I say, no issues with them at all and I understand their reason for moving but it was quite sudden and I now have an unexpected agency fee to try to find new tenants at short notice. That fee is just a few hundred short of the deposit amount.

Rather than deducting this full fee from the deposit, I was thinking of giving approx. half of the deposit back to be more lenient. I’m just not sure how they might react as my impression is they might expect to receive the full amount back.

As I say, they’ve been fine but I’ve also been pretty obliging - rent was low already for the area and I didn’t increase rent this year as per their request since one party was on a temporary reduced wage for a time.

Would appreciate any guidance as I don’t want to propose anything unfairly but also don’t see why I should have extra to pay directly due to their breaking of a contract.

Many thanks in advance!
 
They gave 5 weeks notice. They saved you an agency fee by signing a further year also. I would be inclined to play fair and give them back their deposit in full.
 
Thanks for the response. I do have every intention of playing fair and they did give notice but it is clear from RTB (who I also checked with) that a deposit can be withheld if tenants break a fixed term contract unless they offer to find replacement tenants, which they didn’t.

If I broke a contact myself, I would expect to be penalized (otherwise, what’s the point of the contract?) but in this case, if I give a full deposit back, I’d effectively be penalized with sudden unexpected agency fees because of the other party breaking a contract. Would that not seem unfair to me?

Not sure if I’m missing something or if most would see it differently, happy to get some input, thanks!
 
On the one hand they broke their contract giving you the (possible) entitlement to keep some or all of their deposit.

On the other hand they have giving you (imo) decent notice and have been good tenants.

Your decision.

I dont fully understand your point re agency fee, woukd you not have this fee regardless of how much notice they give?
 
Thanks ArthurMcB - true, I would have had the agency fee anyway even if they only moved out end of contract next July/Aug but now I have it this month instead, a lot earlier than expected, and will have it again this time next year since I’ll stick with the agency...so in a way, it’s an additional fee for this year.

Was having a think about that myself to see what’s fair.
 
My advice is to keep at least 50% of the deposit. Some people seem to think that being a landlord is some sort of charitable function within society. This person has chosen to leave you in the lurch to save themselves money and time as they no longer need to commute.
 
Keep deposit. This works both ways. They are breaking the lease. Why are they breaking it, because it suits them and they can save money.

Why should you be out of pocket?
 
The fact that the OP is asking for advice here regarding the deposit and says much in his favour. However, there is no doubt that he may be out of pocket as a result of his tenants leaving early.

I'd be inclined to wait to see if another tenant can be sought. If this happens immediately there would be little or no cost to the landlord. Then I'd refund the deposit. However, if another tenant cannot be sourced, he has a decision to make.
 
Turn the tables and make things in landlords favour. Would people side with landlord in such instances?

It's a two way arrangement. It works both ways. They are not honouring it. The deposit is therefore lost.
 
There is no automatic entitlement to retain the security deposit in these circumstances.

You can make a deduction for lost income and advertising costs. However, you have to mitigate your losses (ie you have to actively seek a replacement tenant in a timely manner).

You obviously cannot deduct any agent’s commission from the security deposit.
 
Thanks for all the responses so far - not surprised opinions are mixed when legislation isn’t so clear cut but good to hear quite a few can see my side of it too!

I know if the current contract was with an agency, they would subtract their fee from the deposit for having to search for additional tenants. Maybe I could do the same but only for the advertising/searching part of the agency fee (excluding their commission)?

Still thinking of only taking 50% of deposit at most even if that doesn’t fully cover it - appreciate the guidance!
 
There is a very well established legal duty to mitigate your losses when a breach of contract has occurred.

There is absolutely no basis for arbitrarily deducting 50% of the security deposit in these circumstances. Follow this advice and you could find yourself on the losing side of an RTB dispute process.

My advice is to advertise the property for rent ASAP. If you don’t suffer a void, you won’t suffer a loss.

Yes, you can deduct the cost of advertising the property for rent from the security deposit but that’s a fairly trivial amount these days. Why bother?
 
Sarenco said:
You can make a deduction for lost income and advertising costs.
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I think even making a claim for advertising costs is moot. The OP would have had to re-advertise anyway if the tenant had left at the end of the fixed-term contract.

johnsmithhp said:
Still thinking of only taking 50% of deposit at most even if that doesn’t fully cover it
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The amount of the deposit is irrelevant. As @Sarenco has advised, you may only make deductions for certain items that the early termination of contract has left you out of pocket for.
 
Thanks @Sarenco and @NoRegretsCoyote. So the property was already advertised by the agency I contacted shortly after tenants gave notice. So assuming new tenants are in on time and given that agency fees can’t be deducted from the deposit, you think I’d be better off giving full deposit back?

Just find it a little strange that I could be paying extra due to their breaking a contract since I now have an agency fee this month and again in November next year instead of just one in August next year.

Sorry if I’m repeating myself a bit now, thanks!
 
johnsmithhp said:
Just find it a little strange that I could be paying extra due to their breaking a contract since I now have an agency fee this month and again in November next year instead of just one in August next year.
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I think the logic is that an agency fee isn't essential for letting the property. You could in principle do that yourself.
 
johnsmithhp said:
I’ve had no issues with them, they’ve paid on time and kept the place well etc
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In Law, Tenants have rights and LLs have rights also. In reality, if they were minded to, they could have financially abused you no end. Yes its a business, but its a business without protection from abuse to the LL. With that in mind, and seeing how they treated your property, I would have no hesitation in refunding their deposit.
You need to have been on the receiving end of a bad tenant to appreciate a good one.
 
LS400 said:
You need to have been on the receiving end of a bad tenant to appreciate a good one.
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It's a business, not some kind of exercise in karma. Being nice in this case isn't going to cure the world of bad tenants.

The tenant has a contractual obligation which he/she has breached.
 
I run a business, If I dont honor a written contract, or a contract is not honored to me, there are consequences, and I, or they will held accountable pretty quickly.

I also let properties, and it it a business, but Im not afforded the same protections when "things" go wrong, and they do. I accept that because I have to, not because I want to.

But Im experienced enough to know how to handle situations as they arise, other are not. I dont sweat the small stuff. They right thing to do here is return the deposit and stop acting as a one man crusade on principle, and feeling hard done by.
Its a minor issue being turned into a drama. Nothing to do with Karma,
 
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