End of tenancy dilemmas

Co-written by Suzy Hershman, Head of Dispute Resolution, mydeposits and Mike Morgan, Legal Division Manager, Property Redress Scheme (PRS) tenancy mediation service.

Ending a tenancy must be handled with care. It’s vital for landlords, agents and tenants to follow the law and to adhere to what is included in the tenancy agreement to avoid lengthy disputes, which can be costly and time-consuming.

NRLA deposit protection provider, mydeposits has teamed up with the Property Redress Scheme’s (PRS) tenancy mediation service to give best practice guidance for the most common end of tenancy issues.   

When the tenancy ends

Most tenancies end amicably, with the tenant handing back the keys and agreeing with the landlord or agent on any costs that need to be met. But a percentage end up in dispute over how the property has been left. We have found that most disputes are dealt with simply by talking, listening and negotiating to reach an amicable solution, so we would encourage you to first:

• check the tenancy agreement to see who is responsible for what 
• be aware of the condition and standard of the property and its cleanliness at the start of the tenancy so expectations can be managed by both sides 
• be fully prepared and open to discussion and compromise  

Negotiation is nearly always successful if everyone is reasonable. If you are unable to reach an amicable resolution, you have the option of using the free Alternative Dispute Resolution (ADR) services through mydeposits for an independent and impartial decision. Alternatively, the Property Redress Scheme offers free mediation to members. 

This guide will cover: 

• The best way to handle complaints
• End of tenancy flashpoints
• Tenancy deposit issues
• What to do when a tenant wants to end the tenancy early

The best way to handle complaints

We always encourage open dialogue and negotiation rather than formal dispute. This prevents delay in resolving any dispute, reduces frustration and promotes good ongoing relations between tenants and landlords.  
 
Also, prevention is better than cure. The key is always to make sure there is evidence. Evidence can tell a story from the very start of the tenancy and includes the tenancy agreement (stating who is responsible for what) and the check-in report (noting what is in the property and the condition of it). Being prepared from the very start of the tenancy pays big dividends in avoiding disputes at the end.

Where that isn’t possible, there are two routes we would recommend to avoid lengthy court-based processes. These are: 

1. Alternative Dispute Resolution
2. Mediation

Alternative Dispute Resolution

Tenants who do not agree with their landlord or agent’s proposed costs for damage, cleaning or any other costs relating to the property, may be able to raise a dispute through ADR. Both the member (landlord or agent) and tenant must first agree to use the ADR service, which is completely evidence based. 
 
The purpose of ADR is more than just about giving a remedy to the parties, it also aims to make sure that the contract operates properly. It can help landlords to present a case in a way that is most likely to result in a positive outcome, whether that is through an early mutual resolution or with an adjudicator’s decision. 
 
You can read more in mydeposits guide to our dispute resolution service. 

Mediation

Mediation is an interactive way of sorting out disputes between landlords and tenants, with the help of a professional third person (an independent mediator) who won't take sides. 

The independent mediator helps both parties to work towards a negotiated settlement if one is possible. It is a flexible and voluntary method of dispute resolution that is completely confidential. Where mediation differs to ADR is that the mediator generally sets out alternatives for the parties to reach agreement. It can be a quick way to solve a dispute. The average time to reach a resolution using this method is around 10 working days. 

Case study

Flexibility and a willingness to compromise were essential to achieving a positive outcome in this mediation example.  
 
Situation:  

• The landlord, Mrs J, was owed six months’ rent arrears when she contacted PRS Mediation for help 
• The tenant consented to mediation and agreed that they would leave the property in two months’ time, pay their normal monthly rent for that period, and pay back their arrears over the next six months  
• The landlord agreed to reduce the rent arrears by two months to achieve this and it was documented in a legally binding agreement 

Outcome: 

• Mrs J was able to limit her loss to two months’ rent, avoid increasing rent arrears, and avoid the time and cost of court proceedings 

End of tenancy flashpoints

Several material issues can crop up at the end of a tenancy for which a landlord may seek financial compensation. As always, a landlord’s best friend in reclaiming costs is documentation, which should include:

• a robust tenancy agreement that sets out what the tenant’s responsibilities are. Read more about tenancy agreements in Suzy Hershman’s guide for the NRLA, A landlord’s guide to tenancy agreements
• a detailed (updated) check-in/check-out report and inventory with photos and videos
• retained invoices for property items and work carried out
• emails and written communication between the landlord or agent and tenant

End of tenancy disputes

The most common dispute reasons are listed in order below, with most disputes (around three quarters) raised by tenants.

It is possible to reduce the possibility of disputes by simply and clearly letting your tenant know what your expectations of them are during the tenancy, what is and what is not allowed in the property and how it should be left when the tenancy ends. This can be achieved through good documentation, communication and periodic visits.

Cleaning costs: Leaving the property - or part of it - in an unclean state is by far the most common reason for claims. Landlords should know that the property only needs to be left cleaned to the standard it was when let, and not necessarily cleaned to a professional standard. So, landlords can only apply compensation that brings it up to the same standard as at the start of the tenancy

Damage or missing items: Any damage or missing item claims should be on a like for like basis considering the item’s cost,. quality and age. Tenants should report any damage to the landlord rather than attempting to repair it themselves and agree the next steps with the landlord.

When looking for compensation, landlords should take fair wear and tear into consideration and not end up financially or materially better off once a tenancy ends. This means that for something, for example, which is irreparably damaged, they can apply a proportion of the replacement cost having taken depreciation into account. You can read more about wear and tear and how it is applied in the mydeposits fair wear and tear guide and checklist.

Unauthorised changes to the property: Any changes made to the property without the landlord’s consent – including redecoration – will need to be rectified before the end of the tenancy unless otherwise agreed with the landlord. An example might be some improvement to the property which the landlord is happy to keep

Gardening: The tenancy agreement should set out the tenant’s responsibilities for maintaining external areas such as gardens and patios etc. If maintenance of any areas is included, they should be left in a similar condition to that which they were in when the tenant moved in – allowing for seasonal change or adverse weather conditions

Rent arrears: Assuming the tenant is still living in the property at the end of the tenancy and a deposit was taken, costs for rent arrears can be claimed from the deposit. Deposit protection schemes look closely at claims for rent arrears and tenants will need to  prove they have paid all their rent. In cases where the arrears are more than the deposit, the landlord may need a court order to recover additional costs. So, it is in the landlord’s interests to make sure that arrears never get out of hand and mediation can be an option as the case below shows.

Case study: Valerie's story

Situation:

• Valerie had a long-standing tenant who got into difficulty with their rent during lockdown. Having a good relationship with the tenant, Valerie wanted to help them out but was nervous of creating a bigger problem for herself
• The PRS mediation service spoke to the tenant about their situation and discussed what was affordable in the current circumstances
• Valerie was happy to accept a small reduction in rent for one year. A payment plan was agreed with the tenant, who committed to pay £650 rather than £800 rent per month for that period of time. It was also acknowledged that both parties would review the payment of the shortfall at the end of that period
• The landlord agreed to reduce the rent arrears by two months to achieve this and it was documented in a legally binding agreement 

One year on:

• Valerie contacted the PRS mediation service again as the tenant was asking to extend the term of the reduced payment, but Valerie thought she had helped enough during a difficult time as the tenant was now in a more secure position
• A new affordable payment plan was agreed with the tenant to pay the regular monthly rent, plus an additional amount each month to clear the arrears

Outcome:

• Valerie was able to recover £3,000 worth of rent in a little over six months

Outstanding bills:

It is quite common for tenants to move out of the property, only for service providers to chase outstanding payments shortly after. Unless the tenancy agreement states that the landlord will cover these costs, it is the tenant who is responsible for these payments as it is their name on the bills and account.

Landlords should take steps to protect themselves from any issues that might otherwise be attached to the property and cause problems for future tenants or themselves:

1.    Make sure you have forwarding addresses for all outgoing tenants
2.    Take all meter readings at the start and end of each tenancy 
3.    Advise the local council of the date and details of any tenants that move in
4.    Inform the utility providers of any tenancy changes (gas, electricity, water etc.) and ask the tenants to register their details as soon as possible, explaining that this will be their responsibility

Note: Some landlords refuse to refund the deposit (where there is one) until they have proof that all bills have been settled. While this often works, in practice this is not an approach that we would recommend. If the bills are in the tenant’s name, the provider will chase the bill payer and not the landlord.

Tenancy deposit issues

Tenancy deposit protection schemes have been around since 2007. While there are now a number of alternative ‘no deposit’ schemes available to landlords, the vast majority of Assured Shorthold Tenancies (ASTs) are still protected with one of the three government authorised deposit schemes, and occasionally issues arise relating to the deposit protection.

Dispute deadlines: While most end of tenancy negotiations end in agreement, where negotiation is unsuccessful, tenants should be informed that there is a deadline of 90 days (three months) after the tenancy ended, to raise a dispute with the relevant tenancy deposit scheme.

Note: For tenants the statute of limitations applies, so even if they miss the 90 day deadline, they have up to six years to raise a court claim.

Protecting deposits: Every tenant who pays a security deposit can expect to have it correctly protected with one of the available schemes. If the deposit is not protected, the landlord can face severe consequences. In this instance, the tenant will be advised to remind their landlord of the implications of not protecting a deposit and can take legal advice on recouping their deposit, plus possible compensation, depending on region. In England it may be between one and three times the sum of the deposit for the landlord’s breach of the tenancy deposit protection rules.

Late deposit protection: Where a deposit has not been protected within the prescribed time of 30 days, the landlord must understand that, while he will still be able to serve a Section 21 notice, if the tenant raises a court claim for late protection, the landlord may have to refund the deposit in full.

Case Study: Martin

Situation:  

• Martin’s tenant had fallen into arrears, so he sought to gain vacant possession of the property
• But it transpired that he had protected the deposit a few days beyond the prescribed period

Outcome: 

• PRS mediation helped the parties reach a negotiated settlement where the landlord wrote off the rent arrears and the tenant agreed to leave and take no more action in relation to the late protection of the deposit.

What to do if a tenant wants to end a tenancy early

There is much written about tenants remaining in a property after the fixed term ends, against their landlord’s wishes; maybe due to rent arrears and the landlord wants to recover possession of the property. But there are also many instances where the tenant - for whatever reason - wishes to give up the tenancy early.

A change of mind or a change in circumstances

Your tenant’s circumstances may change at any point during the tenancy. They may need to relocate for work, they may be buying a property, or it might be because they are simply not happy where they are living. Whatever the reason, they may decide they need to end their tenancy early. Whether the tenancy can be ended early and how this can be done - including how much notice is needed and if there are any costs in doing so - will depend on both the law and what is in the tenancy agreement.

A tenancy agreement is a legally binding document. By signing it both the landlord and the tenant agree to the written terms which will include how long a tenant is responsible for paying the agreed rent. An agreement may sometimes include a notice clause.

This section looks at the approach landlords should take when a tenant wants to leave the property before the end of the fixed term, with or without the landlord’s permission, and under what circumstances a tenant can leave early without penalty.

When a tenant asks to leave the property before the end of the fixed term, the landlord should:

• remind them in writing, of their contractual responsibilities and what the consequences are of breaking the contract before the end date
• point out the tenancy agreement clause setting out the tenant’s responsibilities, and provide a working example of how all associated costs are calculated and any other conditions, if an early termination is to be agreed
• give a ‘worst case scenario’ to the tenant of their total rent liability up to the end of the fixed term/break clause, but mention that this cost may be reduced or minimised if the property is relet, and give a working example of this scenario

Note: The Tenant Fees Act 2019 is clear that any claim for loss must only be for the actual loss, and no more. It cannot exceed the rent payable for the remainder of the fixed term/notice period, considering any break clause.

The key to applying early termination fees and any reletting costs incurred is to consider the different relationships involved; namely between landlord/agent and landlord/tenant, before looking at the evidence to prove:

• the agent’s reasonable costs to relet the property on behalf of the landlord
• the landlord’s financial losses as a result of the tenant leaving early

Page 56 of the Government’s 'Tenant Fees Act 2019: Guidance for landlords and agents' contains more detail on this.

Remember: There is always an option for the parties to discuss and agree different terms to end the tenancy early.

How a tenant could end a tenancy early

If a tenant knows in advance that they will need to move out after a certain amount of time, this should be part of the negotiation and agreed with the landlord before any agreement is prepared and signed.

For instance, if they knew they were only going to be staying for ten months, they could have asked for a ten-month fixed term. A tenancy can be for any length of time the parties agree on as opposed to the usual six months (the minimum for an Assured Shorthold Tenancy) or a year.

Alternatively, they could ask for the agreement to include a break clause, which is fairly common for terms over six months

The landlord may allow the tenant to leave early if they have found a suitable replacement tenant and should reasonably consider any request, making the tenant aware of any associated early termination fees as well as their own set up fees for a new tenancy, which cannot be passed on to an out-going tenant.

Once the fixed term has ended, and if no new tenancy agreement is signed, under Section 5 of the Housing Act 1988 the tenancy becomes a ‘periodic tenancy’. This means the tenancy rolls on, most typically on a monthly basis, and in line with how the rent is paid the notice from a tenant would also be one month, giving both parties maximum flexibility.

You can find out more in mydeposits guide to early termination fees.

In summary

Whether the end of a tenancy is expected because the term is ending and the tenant is moving on, or is more sudden and unexpected, being informed makes a landlord’s role easier. From carrying out tenant checks and following up references to providing the tenant with a detailed, fit for purpose tenancy agreement right at the start so they know  what you expect of them, you are laying the groundwork for a successful tenancy. 

And remember that sometimes it doesn’t matter how well prepared you are, things happen beyond a landlord’s control. This is when you may need to rely on one or more of the resolution services offered by companies such as mydeposits or the Property Redress Scheme tenancy mediation service.

NRLA members get a 30 per cent discount on the deposit protection fee when they protect a deposit with the mydeposits insurance-based scheme in England and Wales.