Using an ADR Service or going to Court over tenancy deposit dispute
With consideration to the Overriding Objective in the Civil Procedure Rules of England and Wales, litigation should always be a tool of last resort. In practice, this means that going to Court should only be considered if all other routes to resolution have failed and, or are not appropriate.
This applies equally to landlords and tenants and estate agents alike. If a party chooses to go to Court to resolve a deposit dispute and the Court determines that the claiming party should have considered using an Alternative Dispute Resolution (“ADR”) service instead, then a Court can, in some circumstances, award costs against the claiming party and, or not allow a claiming party to claim the costs of the litigation against the losing party.
In practice, this means that even if, for example, a landlord elects to go to Court (as opposed to using an ADR scheme service) and is successful in a claim against the deposit, a Court may refuse to allow the landlord to recover the Court costs from the losing tenant. Such costs could depend on the value of the claim, make going to Court an uneconomical choice for a claimant.
Going to Court also takes time and it is well publicised that the Courts have a backlog of work that predates the coronavirus crisis. Post-lockdown, the backlog is now even bigger and a claimant in a Court case may have to wait a long time for a hearing date. Going to Court can also be a stressful experience for tenants and landlords.
ADR, on the other hand, allows the dispute to be settled at a distance, on the paperwork and evidence, and without in-person cross-examination or a hearing. ADR also, usually, provides decisions much more quickly than going to Court and many landlords or tenants will find that their case is decided in a few weeks (as opposed to waiting months for a hearing date).
Using an ADR service for deposit disputes, therefore, is not only recommended and actively encouraged but may save landlords and tenants time and money (and unnecessary stress!). There are three recognised deposit-dispute ADR companies operating in the UK – they are myDeposits, the TDS, and the DPS.
Whilst the specific rules of each scheme are slightly different, all are free to use for tenants and landlords alike (but for the cost of protecting the deposit, which is the responsibility of the landlord or the agent).
Tenants should be advised at the start of a tenancy which scheme is protecting the deposit and tenants and landlords involved at an end of tenancy deposit dispute should familiarise themselves with the ADR scheme rules before making a claim. Similarly to going to Court, however, the burden of proof lies with the landlord or agent to prove, on the balance of probabilities, that they are entitled to claim against the tenant’s deposit.
Final tips to resolve the deposit dispute
At Court or in ADR, if a landlord or agent fails to prove that they are entitled to claim against the tenant’s deposit, the claim will not succeed. In some rare circumstances, it may be more appropriate to go to Court rather than use an ADR service (see, for example, my blog on claims that exceed the deposit value).
Even in such cases, however, it may be sensible to use the ADR dispute scheme first to resolve the deposit dispute and then look to go to Court for the remainder or what has not been decided by the ADR Decision.
By utilising such an approach, a landlord or tenant can protect themselves against accusations that they have not used litigation as a tool of last resort, and therefore, protect their interest in relation to Court costs.
John Bolton, Adjudicator