Landlords are allowed to make reasonable deductions from tenancy deposits for any financial loss that was due to tenants responsibility. This can include damage to the property, cleaning and unpaid rent. You should inform the tenant of how money will be retained from their deposit and the reasons why. The balance must always be returned.

You can keep money from their deposit to pay for damage, but cannot keep the deposit because of general wear and tear.

The House of Lords defined fair wear and tear as ‘reasonable use of the premises by the tenant and the ordinary operation of nature forces’. The word ‘reasonable’ can be interpreted differently, depending on the type of property and who occupies it. In addition, it is an established legal principle that a Landlord is not entitled to charge tenants the full cost of having any part of his property, or any fixture or fitting ‘… put back to the condition it was at the start of the tenancy’, Landlords should therefore keep in mind that the tenant’s deposit is not to be used like an insurance policy where you might get ‘full replacement value’ or ‘new or
old’. (Guide to Deposits, Disputes and Damages – mydeposits.co.uk).

See below for some examples of what can be considered as tenant liability:

Carpets: Soiling, staining, burn marks, and heavy shading.
Wooden Flooring: Scratch marks, staining and heavy usage.
Skirting Boards, Walls & Woodwork: Soiling, staining, scratch marks, damage, nail holes, blue tack residue, installation of cabling through a wall e.g. Satellite TV cable
Soft Furnishings & Curtains: Soiling, staining, breakages, heavy shading, burn marks and discolouration due to smoke.
Polished Furniture: Scratches, ring marks, burns, dents, chips, soiling and damage.
Beds, Bases mattresses and linen: Staining, rips, soiling, burn marks and tears.
Sanitary Ware, Sinks & Ceramic Tiles: Scale, soiling, chips, staining or damage.
Crockery, China & Utensils: Soiling, chips burn marks, scratch marks, loose handles to pans etc.
Keys: Lost keys and replacing locks
Gardens: Non-maintained lawns, beds, shrubs, and bushes, un-swept paved areas, driveways.
Replacing damaged items:

It is only reasonable for you to deduct as much as is needed to repair or replace what has been damaged on a like for like basis. For example, if the tenants break an old sofa, they should not be expected to pay for a new one.

Deductions for cleaning:

Cleaning is a common cause of disputes about the return of deposits.

It is important for the tenancy agreement to be clear about what is expected of the tenant (ie carpets and curtains must be cleaned to a professional standard) and the Check In report to state the cleanliness of the property at the start of the tenancy.

Be aware that the size of the property is an important factor when deciding whether cleaning costs are reasonable. For example, a 5 bedroom house would take longer to clean than a 1 bedroom flat. For this reason, ‘Standard Charges’ are often considered unreasonable by an adjudicator unless these are explained to the tenant in writing at the start of the tenancy and agreed by the tenant in writing.

It is also important to remember that the Tenant is only obliged to return the property in the same state of cleanliness as at the start of the tenancy, after allowing for fair wear and tear.

Unpaid rent:

If your tenant has unpaid rent you can deduct this from their deposit. It is your responsibility to prove that the rent has not been paid. An adjudicator will ask for copies of accounts or bank statements which clearly shows what rent has been paid to determine the amount that is in arrears.

Resolutions:

It is not uncommon for disputes to take place, especially if obligations are not clearly specified in tenancy agreements so both parties are aware about what is expected of them. It is always best to communicate and to try and resolve the solution rather than going through the timely and expensive route of the Courts.

If an agreement cannot be made there are several options you can take:

The Tenants Deposit Scheme (TDS):

The TDS are the government approved provider of tenancy deposit protection in England and Wales. The dispute can be referred to them and resolved by a professional, impartial adjudicator. They will decide how much should should be awarded to each party based on the evidence provided.
Visit their website for further information http://www.tds.gb.com

Alternative Dispute Resolution Services (ADRS):

This is an alternative way of resolving disputes rather than the traditional route of the Courts. The ADRS supply mediators and
arbitrators and offer a neutral and objective resolution.

Although the decision in not binding, arbitration is positively encouraged under the new Civil Proceedings Rule.

Visit their website for further information http://www.adrs.co.uk.