Managing Tenant Deposits in Gibraltar

In my August and October articles, I explained how tenant deposits should be dealt with at the end of a residential tenancy. I commented upon Gibraltar’s estate agency sector which is unregulated, meaning that tenants often have to rely on the mercy of their agent’s morality, professionalism and experience when it comes to the return of their deposit.

According to the UK’s Association of Independent Inventory Clerks (“AIIC”), landlords are still pushing for ‘betterment’, or ‘new for old’ at the end of tenancies and many have unrealistic expectations of what they can claim against tenant deposits. Whilst the tenant has a duty of care to return the property in the same condition at the end of the tenancy as found at the start (allowing for wear & tear) as listed on the inventory report, the law does not allow landlords to claim ‘betterment’ or ‘new for old’ from the tenant’s deposit.

The AIIC state that many agents and landlords are seemingly unaware of the ‘betterment principle’ (see my August 2014 article) which means that if an item was old or worn at check-in, and after a two year tenancy there is some additional damage, the law will not allow a landlord to simply replace this item with a new one. Instead, some sort of compensation is allowable. The betterment principle applies to cleaning issues as well. If a carpet was badly stained at the time of check-in a landlord can’t expect the tenant to pay for cleaning at the check-out, no matter how long the tenancy has been.

Often landlords will not bother to read the check in inventory (even if one is prepared, which even today, is not always the case in Gibraltar from our research) which will properly detail the condition.

Normal wear and tear is a fact of life with rental properties, just as it would be at home. The best way landlords can ensure that the property’s condition is fully recorded is by having a comprehensive inventory in place at the start of any new tenancy, and that a thorough check-in and check-out report is completed. This is what members of the AIIC offer in the UK. In Gibraltar, landlords and tenants rely on their letting agent to assess fair wear and tear and to have the knowledge and experience to take into account all factors before making their recommendations.

Wear and tear is subjective and there are endless examples. At Chesterton, we have some internal guidelines. For example, if there has been a water stain to the ceiling, our property manager will try and ascertain the source of the problem. If the problem was reported in a timely manner by the tenant then the issue is landlord’s maintenance. If however, the tenant failed to report the problem and damage has increased over time then the landlord’s repair cost will be unnecessarily high. In this case the tenant will incur contributory costs.

As another example, rubs and marks to décor are quite common. In such cases, we must determine if the marks are excessive. The landlord should anticipate the need to re-paint at a period between 3 to 5 years through normal use. Whilst marks and rubs are to be expected, they should be typical for the original condition and length of tenancy. Wear & tear to décor in hallways, kitchens and stairways is inevitably higher than other parts of the property.

According to research from the UK’s Tenancy Deposit Scheme, issues surrounding redecoration are some of the most common causes of disputes between tenants, landlords and letting agents. The organisation’s annual survey found redecoration accounts for 30 per cent of disagreements, which comes in behind only damage to property (43 per cent) and cleaning (56 per cent).

Pat Barber, the chair of the AIIC, has noted that assessing damage to a property’s walls in particular, is an area in which a letting agent’s assessment of wear and tear may differ to a tenant’s.

“As in all things, common sense must prevail. A few light scuffs after six months is definitely wear and tear. However, heavy markings, scrapes, several additional screw holes during the same length of time, will be classed as tenant damage. The longer the tenancy, the more allowance must be made for wear and tear,” she stated.

However, she warned that any nail holes, screw holes, blue tack marks, sellotape, grease marks and drilled holes should not be considered wear and tear and money can be deducted from a tenant’s deposit to account for repairing these problems.

As a general rule, when it comes to actual items included in the tenancy, we have to consider the original age, quality and condition of each item at the commencement of the tenancy, average useful lifespan to value ratio (depreciation) of the item, reasonable expected usage of such an item, the number and type of occupants in the property, and the length of the tenancy.

Does the law help? No, not hugely. The House of Lords defined ‘fair wear and tear’ as “Reasonable use of the premises by the tenant and the ordinary operation of natural forces”.

Gibraltar does not have any low cost adjudication process established for tenant deposit disputes. So the advice remains the same, whether you are a landlord or a tenant, insist on a thorough check-in and check-out process, with a full inventory, and then use a letting agent you can trust to administer this process properly, fairly and professionally.

Finally, I would like to wish all readers of my property column a very happy Christmas. Thank you for reading each month and if you are a tenant hosting Christmas dinner, try and avoid red wine spillages on your landlord’s carpet. That’s not wear and tear.