In my August article, Managing Tenant Deposits in Gibraltar, I commented upon how the unregulated estate agent industry in Gibraltar resulted in the landlord and tenant often being at the mercy of their agent’s morality, professionalism and experience when it comes to the management of tenant deposits on residential properties.

It should be remembered that the tenant’s deposit is the tenant’s money until it is proven or agreed that it is not the tenant’s money. The deposit is released to the tenant when the landlord agrees albeit in a reasonable timeframe.

The landlord can make reasonable deductions (often but not always recommended by his agent) from the deposit for damage to the property (not wear and tear), missing items, cleaning and unpaid rent.

How to evaluate the sum to deduct for damage to items or decoration requires an experienced agent. The landlord cannot benefit from “betterment” in the process ie financial gain. The tenant deposit is absolutely not a “new for old” insurance policy. To avoid “betterment”, there is a technique called apportionment. Apportionment is the process of breaking down the costs of ‘fair wear and tear’ into measurable chunks and thereby allowing a landlord to fairly assign a monetary value to items in a very subjective process.

I received many questions from readers of my August article regarding how to value the damage caused by a tenant or missing items in so far as what to deduct from the tenant deposit at the termination of the tenancy period.

In the UK, tenant deposits must be held under regulated tenancy deposit schemes. Where the sum to be returned is disputed, the parties may refer the case to an adjudicator appointed as part of the scheme. A process designed to avoid the cost and time delays of the legal system which would outweigh the sums involved in the disputes more often than not.

Below are two real case studies from the UK which show how the adjudicator decided upon specific disputes which are not infrequent at the end of any tenancy.

Real Case Study 1

A landlord claimed for the cost of replacing the carpet in one of the bedrooms which had a visible burn mark at the end of the tenancy. He said that the damage was very noticeable in the centre of the room. To support the claim the landlord provided:

• a copy of the tenancy agreement;
• a comprehensive check in report, which stated that the carpet in the bedroom was in a good condition other than furniture indents;
• a quotation from a carpet contractor for the replacement of the carpet;

The tenant admitted to having caused the burn accidentally, but said that the mark was minor and easily concealed by furniture or a rug. The tenant said that it was unreasonable to expect him to pay for the entire replacement of the carpet and offered £70 to the landlord. The tenant admitted liability for a minor burn. The issue between the parties was how much compensation to award for the damage.

It was considered unreasonable for the landlord to replace a carpet at the tenant’s expense unless the damage was so extensive as to make it unusable.

The adjudicator made an award to the landlord for the £70 offered by the tenant. This was considered to be a reasonable sum to reflect the damage caused, in the absence of further evidence to support the landlord’s claim that the damage was so bad as to justify a complete replacement carpet.

Real Case Study 2

A landlord claimed for damage to a marked area of the worktop beside the hob. He said that all worktops in the kitchen had to be replaced because the worktop fitted originally was no longer available. To support the claim the landlord provided:

• a check in report which describes the worktops as being in average condition with a number of marks;
• a check out report showing an additional area of damage by the hob, probably caused by a hot pan;
• an invoice for the replacement of all worktops as part of an overall kitchen refit.

The adjudicator accepted that an area of the kitchen worktop had suffered damage beyond fair wear and tear during the tenancy. However, the check in report indicated that the kitchen was in a tired condition at the start of the tenancy and the landlord appeared to have taken the decision to replace it in full at the end of the tenancy.

The adjudicator took the view that the landlord was entitled to a contribution from the deposit towards the replacement of the affected worktop. The award in this case was £25. The adjudicator did not consider a higher award to be justified given the kitchen’s existing age and condition.

This demonstrates beyond all doubt that there cannot be any new for old claim. The landlords suffer to the extent because minor damage cannot always be repaired without replacing the entire item, yet the cost to the tenant is just an apportionment of the entire cost.

Gibraltar does not have any low cost adjudication process established for such disputes. So choosing a professional, reputable and moral agent to manage the tenancy process is the best way of navigating through the letting process in Gibraltar’s unregulated market.