“Try not to become a man of success, but rather become a man of value.” – Albert Einstein.
“A winner is a dreamer who never gives up.” – Nelson Mandela
Following on from last weeks landlord email some general questions have been emailed in, which really are appreciated as it helps these weekly emails be tailored to what you as landlords want to know about. Also it means I have a head start of next weeks email which will be sent out on the 1st of April, and then we are going to close our laptops Friday and Monday to have an Easter break.
Last week I mentioned we have a new portfolio of landlords coming on from another company, who I am hoping are finding these emails useful, not too much of an overload of information and maybe slightly entertaining!
Scotland’s first wrongful termination order
Private residential landlords would be wise to take notice of Scotland’s first wrongful termination order. It establishes the fact that the law has teeth – and can bite!
It is a ruling which underpins the fact that it could prove costly to evict tenants under false pretences and sets the benchmark for factors tribunals will consider when making decisions, writes Paul Harper, partner at Lindsays.
The case of Rodriguez-Ortega v Dominguez-Lopez reminds us that tenants who suspect they have had the wool pulled over their eyes may watch what a landlord does after they recover possession – and take action if they see signs that their stated intention was not genuine.
The ability of a tenant to claim wrongful termination – through the Private Housing (Tenancies) Scotland Act 2016 – was introduced as a counter-balance to the increased number of grounds on which a landlord could validly terminate a Scottish Private Residential Tenancy (SPRT).
One of those is that the landlord intends to move into the let property within three months of ending the tenancy.
Given that this ground relies on the intention of the landlord, proof of that often relies on the representations of the landlord to the tenant or tribunal.
While, however, the landlord in most cases will be truthful, there is undoubtedly opportunity to mislead in order to secure the eviction. This is where wrongful termination orders can be useful for tenants.
If, after the tenant has left, they can prove that the landlord deliberately misled them or the tribunal about their intentions – as was the case in Rodriguez-Ortega v Dominguez-Lopez – then the tenant can apply for a wrongful termination order.
A landlord who does not intend to move into the property is therefore taking a substantial financial risk if they serve a notice based on false intention.
Thankfully, it would appear that landlords in general do not attempt this approach. No award for wrongful termination was granted in the first three years of SPRT.
However, the case of Rodriguez-Ortega v Dominguez-Lopez – where the landlord never followed through on his claim that he intended renovating and moving into the flat in question – establishes the strength of the law.
Successful wrongful eviction applications can see a landlord ordered to pay the tenant a financial award of up to six times the monthly rent of the former tenancy. In this case, the tribunal ordered three times that figure.
This was based on four factors, none of which are set out in SPRT legislation so set important precedent: The amount of rent, whether the tenant was in rent arrears prior to tenancy termination, whether the landlord had maintained their dishonest position and for how long and the “gravity” of the dishonesty.
Interestingly, while the tribunal noted that the tenant had acted wrongfully by “trashing” the let property before leaving, this was not stated to influence the decision. It was based on the landlord’s actions alone.
This case emphasises the need for landlords to ensure they can prove they have an objectively genuine intention to move into the property – before and after recovering possession. For similar situations, including any intention to sell, this decision is likewise relevant.
At the same time, it’s worth noting that it is permitted for a landlord to change their intentions after they recover possession – so long as witness evidence to a tribunal supports that. The safest option, of course, is to follow through with the original intention where possible or else accept there is a risk the tenant might come back seeking a financial award.
Rodriguez-Ortega v Dominguez-Lopez might be the only wrongful eviction case for some time. However, this depends on whether landlords heed its warnings.
Deposit claims and Why we use Pinstripe Inventories
The email last week mentioned we use Pinstripe to carry out the inventory, checkout and inspection reports which have been making the claims from deposits easier and straight forward. A landlord asked what can be claimed for and what can’t. I have mentioned this in previous emails, but it could be open to interpretation what can be claimed for, and I hope that this explanation from MyDepositsScotland can help make things clearer.
Fair wear and tear – what is it and how is it applied?
While there is no legal definition of the term itself, way back in the 1950s a famous judge, Lord Denning, said that a tenant “must take proper care of the place…” which any reasonable tenant would do, and not cause damage willfully or negligently. However, he also said “if the house falls into disrepair through fair wear and tear or lapse of time, or for any reason not caused by him, the tenant is not liable to repair it.”
This case has been referred to over the years in many cases that have reached the Court of Appeal and continues to be an implied and accepted principle in every tenancy agreement.
In essence, fair wear and tear is the deterioration of an item or area, due to its age and normal use. So, you should only propose a deduction from the tenant’s deposit when the deterioration was avoidable and due to the tenant’s actions or omissions. Not simply from living in the property.
The big question is always, what part of any deterioration would have happened naturally anyway and is considered ‘reasonable’? Or is the damage ‘unreasonable’ if it’s over and above what is normal use, considering all the circumstances?
The simple fact is that everything will need to be replaced or renewed at some point in time.
Does fair wear and tear apply to cleanliness?
A very important rule is that fair wear and tear only applies to the ‘condition’ and not the ‘cleanliness’ of a property or item. The property must be left cleaned to the same standard at the end of the tenancy, no matter if the tenancy lasted one year or six!
What is betterment?
You may have heard of the term betterment, which goes hand-in-hand with assessing fair wear and tear and appropriate cost.
Betterment is where compensation for damaged items would leave the landlord or property in a better position at the tenant’s expense. For example, replacing a five year old carpet with a brand new one.
Betterment applies to both ‘condition’ and ‘cleanliness’. A valid claim where fair wear and tear applies should only relate to the proportion of damage or deterioration over and above what is reasonable use, due to the tenant’s actions.
When assessing fair wear and tear, there are five areas we consider collectively, which I’ll explore below. Having all the information relating to these five areas to hand should lead to a productive and successful discussion with your tenant and a mutually acceptable settlement.
Top tip: This is a good time to remember the value of having a quality check-in inventory so that you have good evidence for any negotiation, if needed.
What factors affect fair wear and tear?
Being able to show something’s age is the first step in calculating a reasonable settlement amount, when assessing the extent of a tenant’s responsibility – the older the item, the more wear and tear it is likely to have suffered. You should always consider this when managing your expectation of what a reasonable cost is. Do you know the age of your fittings, furniture and décor, and have the invoices to back it up?
Is a cost being applied for an item which was brand new, or an area which was free of any damage and marks, when the tenancy began? Or had it already seen several tenancies?
Top tip: Keep all the invoices when you carry out work or replace anything and make sure they are detailed; the date of supply and/or fit will prove the length of time since things were new.
Spending more money on quality items is something to consider very carefully for a rental property and, in terms of calculating fair wear and tear, is most relevant when claiming for replacement.
Quality sanitary ware may, for example, last a long time, but it doesn’t mean that lesser cheaper brands would not last the same amount of time. If a weight is dropped into a sink, it may crack whatever the quality.
The quality of an item is relevant in helping to negotiate a like for like replacement cost yet inventories rarely record the quality of items such as carpets, which cannot be seen in photographs, or sanitary ware. Was the carpet £7.99 or £16.99 a square metre when it was bought? Again, this means an invoice is invaluable when proposing costs for a similar item or quality of work needed. However, the check-in inventory may, at the very least, contain good quality photographs and detailed description to help with any discussions needed, for example the make of an appliance.
Top tip: Make sure your detailed invoices are all kept safe as you never know when you might need them for discussing costs on a like for like quality basis.
- Who is renting the property – who are your tenants? Are there any pets?
Are your tenants students, professionals, families? Are any children and/or pets living in the property? How many bedrooms are there and how many people are renting the property? These questions can all influence the level of fair wear and tear to be expected and may influence the lifespan of areas and items in a property.
Deterioration such as scuff marks, scratches and wear to flooring is unavoidable in all properties. You must consider whether the deterioration is reasonable, or excessive, for the number of people and whether there are any pets living in the property. Are the tenants, for example, a professional couple, a family of four with two young children and a dog, or is it a student house?
A landlord who manages their own expectations will appreciate that if the rental property has six bedrooms and the tenants are a family with three young children and a dog, it is likely to experience a higher level of wear and tear in all the common areas such as the living room, stairs, bathroom and kitchen.
If the evidence shows that there is actual damage or deterioration which is over and above what is reasonable, having considered the type of tenant living in the property, then the tenant may be responsible for costs to put right the ‘excessive’ portion.
Top tip: Appreciate who your tenants are and problems can be spotted early if you carry out mid-term inspections.
- What is the expected life of the item or area?
The life expectancy of an item, or area, can depend on its quality and the amount it’s used. This may be related to the number of hours in the day the property is occupied or the number of tenants in the property.
The quality of the décor and appliances, for example, can vary drastically. The consistent approach we take, on the life of décor and carpet in a rented property, is five years. Other items, such as appliances, work tops, sanitary ware etc. will all be assessed on a case-by-case basis.
When looking to calculate what proportion of a replacement or redecoration cost is reasonable to discuss with your tenant, you will need to consider the age and quality of the item, or area, to decide how many years it has already been used for. Remember, the tenant is not responsible for these years.
Top tip: Make sure any costs you are proposing do not amount to betterment, as with every tenancy there will have been some wear, no matter how small.
- How long was the tenancy?
The last thing to ask yourself when considering fair wear and tear, and before calculating any costs and proposing them to your tenant is ‘how long has the tenant been living in the property’?
As already mentioned above, there will be more natural wear to the property the longer it has been lived in. Think about things such as how much more wear will a carpet or décor have had after one, two or three years, and what was the condition of it when the tenant moved in?
Top tip: the length of a tenancy is often a deciding factor when managing your own expectations on whether the item or area has little or no value left in it, because of its condition at the start and the length of the tenancy.
Breaking down any proposed costs for a tenant, by showing exactly what was considered and how the amount was calculated, using the criteria above, can help diffuse any potential conflict. The value of good quality check-in and check-out inspection reports, together with property visits carried out during the tenancy, plus written records of anything else that may help in any negotiation such as invoices and emails, will all help.
It is also worth remembering the importance of building a good relationship from the start of the tenancy. Landlords and tenants who do this and are reasonable when discussing and listening to each other’s points of view will often reach a mutual settlement, which allows everyone to move on. That is why less than three percent of all tenancies result in the need for an independent decision.
Offering tenants good advice right from the start, and managing everyone’s expectations throughout, together with having quality evidence will all help to avoid a formal dispute.
Why is fair wear and tear so important?
Everyone needs to understand that this principle is here to stay, is implied into every tenancy agreement and must be considered when your tenant has moved out leaving damage or deterioration. If you are thinking about whether to propose costs, all the following questions should be asked so that a reasonable cost can be calculated and discussed, if appropriate.
- How old is the item or area?
- How long is it since it was new?
- Is there an invoice for the purchase or work carried out showing when it was done?
- What information is in the check-in inventory on detail, description and photographs?
TIP: A claim for an item that appears to be old from the start is unlikely to be successful at adjudication. Once an item or area reaches a certain age, the landlord will be responsible for replacing or refreshing it. (see lifespan below).
Example: A claim for a replacement sofa which was recorded as being ‘worn’ in the inventory one year earlier, and left with more threadbare seats than before and a loose arm. The evidence is not likely to be clear enough to show that what had happened to the arm was more the normal use, considering the condition of the rest of the sofa.
- What is the quality of the item or area?
- What records do you have that would demonstrate ‘quality’?
- Detailed invoices or receipts should describe the brand or quality of an item or professional workmanship carried out to demonstrate quality. For items such as sofas, ovens, beds etc., this information should be kept and made readily available
- Do any contractors’ reports and/or estimates, include what they are replacing and if the replacement is on a like for like basis, or if it is a repair, what the likely cause was (see example below)?
- The check-in inventory should provide enough written and photographic evidence on the level of wear in existence before the tenant moved in. This wear will not be the tenant’s responsibility at the end of the tenancy
TIP: Any contractor employed to carry out the repair can help contribute towards any discussion needed with the tenant by writing an explanation of what they found and what the likely cause was.
Example: A fairly common claim is for a replacement bathroom basin which has been cracked during the tenancy. It is not branded so there is no clue as to its quality. While sanitary ware should last several years, accidents happen and a tenant would be responsible for costs towards putting it right. However, claiming for an expensive replacement may not succeed unless you can prove it is the same quality as the damaged one. An element of the normal use must also be considered when calculating any costs.
- Who were your tenants?
- Were they individual students, a professional couple or a family?
- Allowing a pet into a property may affect the level of normal wear to a small extent, but anything more is likely to be damage and proportionate costs for putting things right may be justified
TIP: Understanding who your tenants are will help manage expectations on how tenants should leave the property and what amounts to ‘normal use’ for those living there.
Example: Crayon marks on walls are a classic example. Tenants often think these should fall under fair wear and tear but they are responsible for the damage and costs for putting them right. But remember these must be proportionate to avoid betterment.
- What is the life of the item or area?
- How long an item should last is always subjective and subject to change
- Remind yourself that the consistent approach taken by all adjudicators for décor and carpets starts at five years (in student properties it is closer to three years!) and this is where to start
- The lifespan of other items will depend on various factors and be dealt with on a case-by-case basis
TIP: Good evidence can extend the life of an item. For example, a check-in inventory describing the carpet in ‘excellent condition’, with supporting photographs, and a purchase invoice dated four years ago would suggest the life expectancy is longer than five years.
Example: In a situation where something happened during the tenancy, such as a leak, a contractor’s report/invoice which explains the likelihood of the tenant being responsible for the initial problem, or whether it was due to normal wear, is a good start. Then, asking the question, did the tenant report the problem as soon as they noticed it or was it allowed to steadily get worse? This information will all be part of the calculation to work out the extent of the tenant’s responsibility towards putting things right.
- How long was the tenancy?
- Remember that the tenant is not responsible for the normal wear of any part of the property, while living there
- In addition, and unless the item or area was ‘new’ at the start, you will need to add on the use in previous tenancies
TIP: Make sure the check-in inventory is detailed, with a full description of the condition of items and areas in the property, and dated. This information will be key when it comes to any discussion at the end.
Example: A claim for the full cost of redecoration due to excessive damage, which made no allowance for normal use of the property during the two year tenancy. If the condition of the décor at check-in was recorded as ‘scuffed, marked and with nail holes in places’ it would be unsuccessful. However, a claim may succeed if the damage was due to the tenant’s negligence and the proposed cost had considered that the property was going to need redecoration within a year or so, using the life expectancy of five years.
The key to success is having all this information at hand to build a good picture for both yourself and the tenant. Making sure to calculate costs which are reasonable and proportionate, and which a tenant can understand, will increase the chance of a successful discussion.
As today is International Waffle Day I think that I will have a hot beverage and waffle as my mid morning snack.
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Take care, and as always stay safe,
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0141 221 3990
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