20% of all disputes referred to the Residential Tenancies Board regarding residential lease disputes relate to deposits. In an area so hotly disputed it is important that all parties are aware of the issues that arise and how to avoid them, saving time and money for everyone involved.

We consider the legal limits of the size of deposit that can be requested, who should hold the deposit and when it should be returned.

Amount of deposit

A recent case highlighted where this can be an issue when a student seeking accommodation in Dublin was advised that she would be required to pay five months’ rent in order to secure the property. While this type of request would certainly be off-putting to most and perhaps even a tactic to secure a certain type of tenant there is no set legal limit on the amount of deposit that can be requested by a landlord.

The Residential Tenancies Board (RTB) recommends that a deposit should be no more than one month’s rent. While there is no legal basis for this recommendation any landlord would be wise to hold this one month suggested deposit level in the knowledge that any dealings with this deposit could be subject to a dispute and determination order of the RTB.

Who should hold the deposit

In the UK certain companies have been approved by the UK government to create tenancy deposit schemes. These companies hold the deposits and administer their return and deductions therefrom and have the power to determine disputes. Where a landlord in the UK decides to require a deposit they are obliged to lodge the deposit with one of the approved schemes and to notify the tenant of the details thereafter.

A similar scheme was proposed by the Irish government in a piece of 2015 legislation whereby the RTB would hold and administer the deposits. Where a landlord received a deposit they would be obliged to remit this to the RTB. While it was hoped that this would provide parties with more security in the area the administration costs for the scheme were to be met by the interest earned on the deposits held by the RTB. With interest rates plummeting this is no longer workable and Minister for Housing, Planning, and Local Government, Eoghan Murphy, has stated that further legislative changes would be required in order to develop the scheme envisaged in 2015.

As it stands the deposit is generally held by the landlord or their agent and there are no laws which govern how or where it should be held, save that a deposit paid by a tenant is the property of the tenant until the landlord has a legitimate claim to it.

Return or retention

The reasons that a landlord can have recourse to a tenant’s deposit, or part thereof, are limited and are clearly set out in legislation in relation to residential tenancies and these are set out in section 12 of the Residential Tenancies Act 2004 (as amended):

• Where rent, charges or taxes due under the tenancy agreement are due, and
• Where the tenant has caused a deterioration in the condition of the dwelling (fair wear and tear excepted) which the landlord is required to fix

Where these section 12 provisions are not met the deposit must be returned.

When a tenancy is coming to an end we would advise a landlord to carry out a comprehensive inspection to confirm that the property is clean and has been returned in a similar condition to the beginning of the tenancy. In this regard photographs taken prior to the commencement of a tenancy can be a useful gauge. In addition meter readings should be taken and other utility charges confirmed.

Conclusion

The retention of a deposit can cause hardship to a tenant and for that reason is often the cause of a dispute. A landlord should strike a clear and fair balance when it comes to both requesting and retaining a deposit.

A landlord should be aware of the specific reasons set out in section 12 of the Residential Tenancies Act 2004 (as amended) for the retention of deposits.

For more information, please contact a member of our Real Estate team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.