When is the return of the Deposit deemed as final

At the checkout stage, a member of PIMS and their Tenant both agree that there has been damage to the property. To achieve an amicable solution The Landlord compromises and agrees on a lower figure to be deducted from the deposit. To conclude the matter the Landlord and Tenant sign off the statement of account as “full final settlement”, this is witnessed. The balance of the deposit is promptly returned to the Tenant.

A week later the Landlord is notified by MyDeposits that the Tenant has raised a dispute

MyDeposit insist the Landlord pays over to them the monies that had been deducted. The Landlord refuses to pay the monies over for they feel this is a direct breech of a legally binding agreement that they had reached with the Tenant.

We advise the Landlord they have little choice but to comply with and co-operate with MyDeposits otherwise they will adjudicate and find in the Tenants favour. We inform our member the insurers reserve the right to pursue the Landlord through the courts for recovery of any monies awarded and the Landlord may also be liable for any legal costs the insurers incur.

The Landlord feels aggrieved that acting in good faith, they had accepted lower recompense and now the tenant is reneging on a legally binding agreement that they had thought had concluded this matter. The PIMS Member wants to consider their options.

What are the Landlords Options

At PIMS we work with a number of specialists we consider Tom Derrett of www.ADRsolution.co.uk most suited to advise on this members query.

Lawyer, Tom Derrett is an experienced deposit protection adjudicator who gives legal advice to landlords and letting agents in deposit disputes through ADR Solution.

I think the landlord in this case is wise to be cautious about letting My Deposits handle this.

As soon as claims get more complicated than merely calculating betterment, the decisions from the deposit protection schemes become unpredictable. It’s not that they are likely to be wrong, but that there is no system of precedent, so you might get opposing decisions from different adjudicators on the same set of facts.

The landlord’s alternative, of course, is to bypass My Deposits and ask the courts for a judgment, however, the landlord is obliged by clause D2.1 of their agreement with MyDeposits to pay the disputed amount to MyDeposits within 10 days of the dispute arising, regardless of whether MyDeposits or the courts are to resolve the matter (D2.2). I am not aware of a way around this.

The question, then, is what are the relative merits of adjudication and small claims court in the given circumstances.

On the facts available, and the tenant no doubt has a different perspective which I cannot take into account, I do not see why a district judge would not uphold the signed agreement between the two parties and, for this reason, the landlord may prefer to pursue this dispute through the courts. There are downsides to small claims court, though. The court fees are low, but they are still there. An average deposit claim might cost around £100 to file. Courts tend to be busy and your case may not be heard for six months and, should the tenant’s alternative perspective prove compelling and you lose, there are the other side’s costs to pay, also. If, on the other hand, the landlord chooses to use MyDeposits’ in house dispute resolution service, there will be no costs to pay at any stage, and disputes are usually turned around in a six weeks or so. If the landlord decides to use MyDeposits, they should immediately send a copy of the signed agreement to apportion the deposit in accordance with D2.3, stating that the tenant has already agreed to the division of the deposit and request that in accordance with D4.2 of MyDeposits’ terms and conditions, the disputed amount be distributed in as set out in the signed agreement.

Using MyDeposits’ own terms and conditions should be enough to swing it in the landlord’s favour, but if the matter proceeds to adjudication, the landlord has another choice. Whether to (1) stick to the agreement and require it to be enforced, or (2) to abandon the compromise agreement and claim for the full amount they feel entitled to.

Although option (2) may be tempting, I would advise the landlord to stick to option (1).

Winning formal disputes is often about perception management. To win, you need to maintain the impression that you are the reasonable party, and that the other side is being unreasonable by changing their mind and not sticking to their word. If the landlord decided to change the amount they felt entitled to, they would lose the high moral ground and potentially appear just as changeable as the tenant. By sticking to option (1), you also reserve a stronger position if you decide to ask the courts to review an adverse decision.

As an aside, another reason to avoid conditional offers (I’ll take £X if you agree now, but I’ll claim for £X+Y if we have to go to adjudication) is that it can make your claim unclear. The tenant is bound to send in your emails making concessionary offers to settle and this can potentially confuse an adjudicator as to exactly how much the landlord is claiming for what. You can mark your offers Without Prejudice (meaning it is an offer to settle and should not be revealed in court) but the bare fact is that most tenants have no idea what this means and will happily submit Without Prejudice communications in evidence... ...but that’s for another day.