Security deposits are one of the most frequent causes of conflict between landlords and tenants, but many disputes can be avoided if both parties follow the guidelines set out in the Rental Housing Act.
It is important to know that landlords are entitled to withhold part or all of the deposit if a tenant causes actual damage to the property during the term of their lease. However, the law clearly distinguishes between damage and fair wear-and-tear, which is the normal deterioration that occurs through everyday use. Faded paint, worn carpets or slightly scuffed woodwork do not qualify as damage and may not be deducted from the deposit.
To fairly determine whether deductions are warranted, landlords and tenants must jointly conduct both an ingoing and outgoing inspection of the rental property. The Rental Housing Act stipulates that these inspections must occur before the tenant moves in and within three days after the lease ends. Both parties should attend, and the inspections should be documented with detailed notes and dated photographs.
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If no damage is found and there are no arrears, the full deposit plus interest must be refunded within seven days. If damage is found, the landlord has 14 days to get quotes and return any remaining deposit funds after repair costs are deducted. If the tenant fails to attend the final inspection, the landlord may proceed alone and, in such cases, has 21 days to assess damages and process the refund.
Clearly, proper inspections are vital to deposit protection. They must be comprehensive and transparent, covering everything from plumbing and electrical systems to outdoor areas. Any pre-existing issues, no matter how minor, should be recorded in an entry inspection report and attached to the lease agreement, along with a mandatory disclosure document that lists any property defects that the landlord or rental agent is aware of.
Using technology can greatly improve the accuracy and security of inspection reports. The digital checklists, photos and cloud-based storage systems used by professional rental agents make it easier to create detailed records and ensure that these are securely preserved. Ideally, these records should be emailed to tenants and safely stored for reference in the event of a dispute.
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If a tenant believes their deposit is being unfairly withheld, or if they discover that it was not correctly held in an interest-bearing bank account, they can approach their local Rental Housing Tribunal.
These tribunals provide a cost-effective and relatively quick way to resolve rental disputes through mediation and, if that fails, by way of a formal hearing, after which the Tribunal will make a ruling that carries the same legal weight as a Magistrate’s Court judgment.
Tenants can also reduce their risk of encountering deposit issues by renting through a professional, reputable managing agent. Such agents are legally bound to follow procedures that protect both parties, and will offer compliant, written lease agreements, proper inspections and timely maintenance and repairs. When renting directly from private landlords, the correct procedures are not always followed, leading to an increased risk of misunderstandings and disputes.
