Tenancy deposit scheme
When your tenant pays a deposit you must make sure that you place it in a tenancy deposit scheme.
This protects both you and your tenant should there be any dispute when it comes to returning the deposit at the end of the tenancy.
There are two types of scheme you can choose from - a custodial scheme or an insurance-based one.
In the custodial scheme you must pay the deposit into the scheme whereas with the insurance-based one, you keep the deposit but must pay insurance to the scheme.
Alternative Dispute Resolution
If there's a dispute about returning your tenant's deposit and you're unable to reach agreement, then a free service is offered by the tenancy deposit scheme which can help you resolve the dispute.
This is called an Alternative Dispute Resolution (ADR) service.
This doesn't prevent you or the tenant deciding to take the matter to the small claims court instead of using ADR if you can't reach an agreement.
Small claims court
You can use the small claims court for most breach of contract claims.
Although it's a simple way to settle a dispute, the small claims court should only be used as a last resort.
You must try to resolve the problem before it goes to court. Only if this proves impossible, should you consider court action.
The main restriction is on the amount you can claim for. In England and Wales, you can claim up to £10,000 in the small claims court.
In Scotland and Northern Ireland, it’s £3000.