Damage Deposit and Rent Arrears

Published on Tuesday, 26 February 2013. Posted in Case Studies


The Agent had arranged a two year tenancy between the tenant and the landlord, Mr G. By the ninth month the tenant had accrued £6,900 rent arrears and had caused approximately £2,000 worth of damage to the property. Mr G commenced possession proceedings and a Court hearing took place at the tenth month where the judge awarded possession to Mr G together with an order for the rent arrears owed by the tenant. The matter of damages to the property was not considered by the Court. However, unbeknown to Mr G, a few days before the Court hearing, the Agent agreed with the tenant that due to the severe rental arrears the deposit of £1,592.28 would be released in full to cover some of that debt. After being informed of this development, the judge deducted £1,592.28 from the money judgement order for rent arrears awarded to Mr G. Mr G then complained that the Agent’s actions had denied him the opportunity of seeking payment towards the damages via the
tenancy deposit arbitration process and instead, was left with no option but to commence further legal action to recover these monies.

The Agent argued that they had obtained an agreement
from the tenant for the deposit to be disbursed as
rent in order that Mr G would receive it more speedily
than if he had claimed it for damages via arbitration.
However, Mr G argued that he did not see why he
should pay for further legal action and asserted
that the Agent should compensate him for the full
£1,592.28. I found no evidence in the Agent’s file which
indicated that they had sought Mr G’s instructions
prior to taking the decision to approach the tenant
themselves to negotiate the release of the deposit.
I supported Mr G’s grievance insofar as he had been
deprived of his right to pursue the tenant for damages
by means of adjudication and I was critical of the
Agent for their breach of Paragraph 8e of the TPO
Code of Practice and also legislation that prohibits
the holder of the deposit (that being the Agent as
stakeholder) from disbursing the deposit without the
agreement of the landlord and tenant. However, I did
not agree that the Agent was liable for the costs of
the tenant’s damage to the property and, therefore,
was not persuaded that they should reimburse Mr G
with the full deposit. That said, the Agent’s actions
had and were clearly going to cause Mr G avoidable
aggravation and potential costs and I, therefore, made
an award of £500.



The deposit monies are the tenant’s monies until such times as it has been agreed by both the tenant and the landlord that they can be distributed in a particular manner. If those parties cannot agree, then the matter should be referred within the relevant timescales to the appropriate tenancy deposit scheme.