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Everything You Need to Know About Holiday Rental Damage Deposits

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Holiday rental owners take a huge risk every time they let their holiday homes. With a constant turnover of holidaymakers, property owners live in fear that guests will cause damage, or they’ll end up with their very own Airbnb horror story.

Holiday rentals get damaged. It comes with the territory.

How can you protect yourself from financial losses when it comes to damage from guests?

Many rental owners charge a security damage deposit. However, there are plenty of pros and cons and things to bear in mind. Here is everything you need to know to help you decide if taking a damage deposit is a good idea for your holiday letting business.

How do damage deposits work?

A damage deposit is a set amount of money (typically £100 per week or 10% of the rental) that guests pay in order to cover damages to the property incurred during their stay. If there isn’t any damage, then the deposit is refunded to the guest.

Pros of taking a damage deposit

  • It’s one way to ensure that as an owner, you aren’t financially responsible for damage caused by the guest.
  • If there is a risk that a guest could lose their deposit, it gives them a greater sense of responsibility for the property and makes them think twice about their behaviour.
  • Although you have probably screened guests to avoid those who are likely to cause damage, some slip through the net. Security deposits tend to deter unsuitable guests who have a hidden agenda for renting your property – e.g. a party or stag do.

Cons of taking a damage deposit

  • Having to hand over extra money and the worry or surprise charges can deter some guests from choosing your holiday let.
  • It’s often the owner’s word against the guest’s and this can lead to big disputes, bitter guests and negative reviews.
  • Guest can always dispute the charge with their credit card company
  • They involve extra work for the host.

Dos and don’ts when taking a damage deposit

There some best practice tips to follow when taking damage deposits. Read on to find out our top dos and don’ts…

Dos

  • How much deposit should you take? It is standard practice for most property owners to either use a set amount e.g. £100 per week or 10% of the rental price total. Payable when the balance is due.
  • Inform guests of your damage deposit policy. Your holiday rental agreement should include all your specific rules and any breaches which would result in full or partial loss of the damage deposit. Ensure guests agree to your rental contract before accepting any bookings.
  • Have a plan to identify damage. Put in place a system to identify when the damage occurred and prove who is responsible. If damage only comes to light when it’s too late to identify who was responsible, then the whole point of taking a damage deposit is futile. The simplest way is to inspect your holiday home and take photos/video after every changeover. This way you have evidence of what condition the property was in when the guest arrived and its condition when they left.
  • Stand by your decision. There will be incidents when damage is due to negligence and deliberate e.g. no effort to clean up vomit or an attempt to hide a stain by turning the sofa cushion over. Don’t be afraid to deduct from the security deposit for negligence, that’s the whole point of taking one.
  • Encourage guests to contact you if anything gets broken or damaged.This will enable you to ensure that any visitor damage or accidental breakage dealt with in a timely manner.

Don’ts

  • Preventing disputes. Unless you are 100% certain who is the culprit of damage, don’t deduct from the damage deposit. Disputes are difficult to resolve without proof and will only consume your time, morale and lead to a negative review. If you suspect the guest is guilty, simply put them on your never-rent-to-again list.
  • Be excessive. Only deduct from the security deposit a reasonable amount. Take into account the age of the item e.g. you can’t expect a guest to replace a broken chair ‘new for old’ if it’s 10 years old. Allow for depreciation.
  • Sweat the small stuff. If the damage is minor, clearly accidental (a dropped plate, scuff marks on the walls, or make-up left on towels), the guest makes a valiant effort to clean the spillage or offers to pay – it might be worth letting the damage go. Accidents and mishaps are part of life. Deducting from the security deposit for small damage can leave everyone feeling negative after having a great holiday.

Tips when withholding or deducting from the security deposit

If guests damaged your property and you intend to retain a portion or all of their deposit, you should inform them immediately. Although it’s annoying that your property hasn’t been treated with respect, be professional and keep your emotions out of it.

Sample email:

Hi, [Guest]. I hope you enjoyed your holiday in [Property Name]. Unfortunately, after your stay, our cleaner reported some damage. [Give details of the damage]. I’ve attached time-stamped photos of the property before and after your stay for reference.

I’m sure it wasn’t intentional, but as per your rental agreement, we’ll be retaining [Amount] of your deposit to cover the cost and refunding [Amount] being the remainder of the deposit.

 I’ve also attached receipts detailing the cost to repair the damage/replace items.

If it’s evident the guest wilfully caused damage, take a far sterner tone but it’s best to avoid being too emotional.

Most guest will apologise for the damage and pay. However, there will be those who will insist the damage was there when they arrived and contest paying for the damage.

Politely but firmly tell them that they agreed to be charged for damage in their rental agreement, and you that you have photographic and video evidence that proves that the damage occurred during their stay. Also, highlight the financial impact of the damage. Typically, this puts an end to disputes so you can move on.

Review blackmail

If guests threaten to destroy you on social media and leave a bad review, don’t worry. You can report their threats to the listing or review site in question. They will generally remove bad reviews that are unfounded. If the bad review goes live, tell your side of events. Your supporting evidence should work in your favour.

What if the cost if the damage exceeds the damage deposit amount?

Although few and far between, there will be occasions when the financial cost of the damage will be more than the security deposit taken. You can attempt to recuperate the extra costs from the guest, absorb the costs as ‘being the nature of the business’ or claim on your insurance and use the security deposit to cover your excess.

You can potentially take legal action to recover expenses, but this can sometimes end up costing more in the long run and be stressful.

Get insured

For those owners who don’t take a damage deposit and for damage that exceed the security deposit taken, it’s essential to take out comprehensive holiday let insurance that covers loss or damage to your holiday rental.

Check terms of the insurance so you understand what is and isn’t covered. For example, some policies don’t cover damage by dogs.

There are arguments for and against taking damage deposits – but having insurance is essential.

To summarise

Damage deposits are one of the most effective ways to safeguard against out of pocket expenses due to irresponsible guests. While they can be off-putting for some guests, they won’t be an issue for responsible renters because they know they’ll leave the property exactly as they found it and get their deposit back.

To avoid nasty disputes over damage to your property, ensure you have a system to identify when the damage occurred and prove who is responsible.

Remember, accidents happen, and sometimes it’s better to keep the goodwill with your guests if it’s a genuine accident or small incidents. Rather than withholding their security deposit, tell them it’s no big deal. You are more likely to get a positive review and a guest who returns for another stay.

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36 Comments

  • Mrs Arran Middleton |

    I’ve just been speaking to a holiday cottage letting agent who informs me that taking a damage deposit is now illegal unless the agent opens a bank account for each customer who pays a damage deposit, so it doesn’t get spent ! Is this a way of getting out of offering to take damage deposits? Or the truth!?

    • Philip |

      This is new to me, which letting agency was it? Have you spoke to any other agents about this? I will ask around to see what other agencies say.

    • Sue |

      Since 2007 a tenancy deposit scheme was set up to protect tenants from unscrupulous landlords but this was for Assured Shorthold Tenancies, deposits are lodged with an independent body, there are currently 3 approved providers. This does not apply to holiday lets in these instances a small deposit of £100 may be taken to cover minor damage and insurance taken out to deal with larger claims. Check the direct gov website

  • RICK BOND |

    Some of our owners operate using a security deposit. These range from £100 to £600. Proving a claim is always a tricky one. We have a rule with owners that any claim must be reported by the housekeeping team within 24 hours of departure and always before the arrival of the next set of guests – whichever is the sooner. This reduces the ‘it was working when we left it’ response quite considerably.

    We also advise owners to ensure they have contents insurance in which any valuable items are separately listed.

    • Philip |

      Great advice Rick. Damage disputes are the No1 complaint I see from both owners & guests. Owners/agents/housekeepers need a policy like yours to identify the culprit of damage immediately. Unless you are 100% certain who did the damage then don’t deduct from the security deposit. It simply isn’t worth ruining your reputation with bad reviews. Also, have guidelines for when to deduct – simple breakages (crockery) or minimal accidental damage shouldn’t be charged for. Although annoying for owners, it comes with the territory when letting.

      However, if guests have been negligent and caused damage, then owners have every right to deduct from a security deposit or pursue via the courts if necessary.

      Owners should also ensure they have accidental damage insurance when holiday letting should the loss/damage be greater than the damage deposit or if one isn’t taken.

  • Chris C |

    We take a £150 security deposit and clearly state within the rental agreement that if there are any damages these will be deducted from the security deposit. It’s also important to have a clause in your rental agreement to stipulate that any damages above the initial security deposit will be covered by the guest. When a guest puts down a deposit I think there is more awareness to ensure the property is looked after.

    Ensure that all guests sign the rental agreement so if anything does go wrong you have a contract. Insurance is still required regardless.

    • Philip |

      Thanks for your comment Chris.

      Re:

      It’s also important to have a clause in your rental agreement to stipulate that any damages above the initial security deposit will be covered by the guest.

      I wonder if anyone has been in a situation where they have successfully pursued a guest for such damages (through the courts?) if they refuse to pay any amount above the security deposit? Would it be worth the cost and effort involved? Ensuring your insurance covers accidental and malicious damage is an essential safeguard.

  • Ruth |

    I’ve just come back from visiting England, and stayed at an Apartment, in Slough. I paid a 200 pound security deposit, which I’ve done countless times, for other things over the years, and all those times, they always showed up as ‘pending,’ in my bank account, but in this occasion, the amount was actually withdrawn from my account. To say that I am furious about what he did, is an understatement. The owner of the apartment has therefore, used my money as an interest earner for himself, which infuriates me, even more. He never at any stage, said that he was going to actually take the money from my account, because as I’ve said, I’ve ever only had these types of payments show up as pending in my bank account. He had no right doing what he did, and I certainly did not give him permission to help himself to my money.

    I’d really appreciate your opinion on this, because I’m fairly sure that you would agree with me, that he should never have taken the security amount out of my account, but should have held it there as a pending only amount.

    Please respond as soon as you can, as I still have an ongoing issue with this person, as it has been nine days now, and I still have not received my money back, even though it was promised to me within 5-7 days, and he even informed me that it was processed, days ago.

    • Philip |

      Hi, It’s common practice for holiday rental owners to bank the security deposit due to the fact that if the payment hadn’t cleared there wouldn’t be anything to deduct from if a guest caused damage. E.g. The guest could simply cancel the cheque.

  • Valerie Young |

    I let my holiday home for the first time this year. The first guests left the house in a bad state. The carpets needed to be professionally cleaned before the second guests. The second guests, who arrived a few days later, left a review. The review was very good apart from the smell of cigarette smoke in the bedrooms. I have a strictly no smoking policy and was devastated to know that guests smoked and as a consequence undermined the holiday home.

    How can I prevent that happening again? I did not ask for a damage deposit as I thought this would have been prohibitive.

    • Philip |

      Although the majority of guests will respect your home, there will always be a handful of guests who cause extra cleaning. It comes with the territory I’m afraid. What does your guest information and terms and conditions say about smoking? Have a read of our Holiday Home Booking Terms & House Rules Template post where we suggest including this statement “Smoking anywhere on the premises will result in immediate termination of occupancy and forfeiture of all payments. This must be strictly adhered to and any damage or extra cleaning caused smoking will be at the expense of you”. The smell of smoke should have been noticed and dealt with at changeover, so the next guests don’t complain. Here are some tips to get rid of the smell of smoke. I would reply to the review and clarify why the property smelt of smoke. I hope this helps.

  • Sarah |

    I have been asked for a damage deposit of £200 (week’s rental £580) for a holiday rental to be paid 8 weeks before taking the apartment. Clearly this is being used as a cash flow management system as they want the money paid directly into their account. This seems excessive to me – I would not mind paying something when I arrive, to be given back when I leave. Is this reasonable?

    To be honest, if I had read these conditions properly at the time of booking, I would never have made the booking.

    • Philip |

      Hi Sarah, this is standard for those owners/managers who take a security deposit. Regarding your comment “I would not mind paying something when I arrive, to be given back when I leave. Is this reasonable?”, some owners might not be happy with this as damage could be discovered shortly after the guest has left with their returned deposit. It would be difficult for the owner/manager to identify damage with a quick check of the property. It’s usually identified during the changeover cleaning. If you are concerned then check over the property on arrival and report/photograph any existing damage to avoid a dispute after you leave. From experience, owners deducting from security deposits is rare (unless the damage is deliberate and significant). Enjoy your holiday.

  • Thomas Benedict |

    Hi Guys,
    I am considering to rent out my motorhome to someone for 2 weeks. What do you think would be a reasonable deposit to be asked for?
    Thanks for your answer,

    • Philip |

      £100 would be reasonable. What do companies charge e.g. Campanda

  • Sarah |

    Hi, I wonder if you could advise? We recently stayed in a cottage and 3 weeks after our return we received an email to say we had caused some damage and needed to pay just over one hundred pounds. We strongly disputed the damage claims but despite writing with our concerns they are still chasing us. The strange thing is that they took our card details for a damage deposit which they said they would hold for 15 days. They did not take it or contact us about damage charges until 3 days after the 15 days had expired. Can they still make a claim against us even though they lost their chance to take our deposit?

    • Philip |

      What type of damage was it? 3 weeks is a long time to contact you about damage. Ideally it should be reported the same day as check-out or within a week. If you dispute it then the property manager would have to prove you did the damage. If payment is deducted you could dispute it with your card provider.

  • Adam |

    We have just started letting our chalet this summer. Following some advice from some experienced property managers our security bond arrangement seems to be working well. The bond is £150 which guests can either pay via BACS with the cost of the rental or, pay in cash on arrival when they receive the keys to the property. Check out is at 10am on the final day allowing four hours to clean thoroughly and check the inventory before the next guests arrive after 2pm. If all is well, the deposit is transferred back to the clients account on the same day of their departure. We haven’t had any complaints about asking for a bond and as we have spec’d the property fairly highly, it seems fair to ask for the deposit and so far, the guests have been in agreement. It seems obvious that the more your tenants feel looked after and respected, the more respectful they are although I’m sure there will always be an exception. Hopefully we never meet.

    • Philip |

      Hi Adam, looks like your procedure works for you. Hopefully you wont have to use the security bond!

  • Heather |

    Hi, We stayed in a really special apartment last week and were asked to provide 500 Euro damage deposit, which we did. We left the apartment with no damages or breakages and as we had an early flight had to drop the keys in a letter box. Later that morning we had an email saying we had damaged a floor tile by dropping something on it and they would be taking the money from our deposit to pay for it. I requested photos as I knew we had not dropped anything. They have sent us photos of a tile that is chipped and cracked but it was under a thick rug which they had rolled back for the photo making me even more suspicious that it had been done prior to our arrival. They maintain it was not there on the inspection after the previous tenants. I know we have not dropped anything heavy enough to cause such damage and especially not through a thick rug. I have reiterated this fact to them and also added that the apartment door was in fact open when we arrived with our keys to get in, and a workman was doing some work in there, so equally he could have done some damage. I’m not sure what our rights are as its a matter of their word against ours? Any advice gratefully received

    • Philip |

      It’s their word against yours and without evidence proving that the tile wasn’t damaged before your visit it would be a harsh decision to charge you. Rightly so, dispute it. ow did you pay the damage deposit?

  • Mary Ette |

    I have owned and managed a London apartment rental agency since the 1980s.
    Taking security deposits has always been the norm . It is very rare to deduct anything
    but they act as a deterrent. The most common reason to deduct is not damage but loss of keys which in London can be expensive to replace.
    We now ask deposits by secure on line payment a week before arrival and refund a week after departure, rather than hold the guests’ money longer than necessary.
    If a security deposit is not banked it is not worth taking it .
    To avoid any disputes about damage we suggest guests are asked to report anything damaged on arrival and also to let owner know if they damage anything during their stay so it can be replaced or repaired before next guests arrive. Also if owner or their representative checks guests out that is a final check.
    Mary Ette

  • Nikki |

    I am renting a large house for 18 people for a weekend at a cost of £3330. The terms state a damage deposit of £1000 (which I feel is rather excessive). The balance of the cost is to be paid 3 months prior to our stay and they have also asked for the deposit at this time. I don’t think I should have to pay this large amount so far in advance. As there is no way we could cause damage before we get the keys, it seems unreasonable to hold my money for so long beforehand. I would have no problem paying this say 1 week before. Is there anything in law about this? Any advice would be gratefully received.

    • Philip |

      Hi, many owners take a security deposit, which vary depending on the booking type. As the group includes 18 people, the risk of damage is higher than say a group of 4, hence the large deposit. I’m sure details of the payment/damage deposit are in the booking terms and conditions.

  • michael |

    Guests left the property very dirty and untidy can I take some money from the deposit?

    • Philip |

      What do your terms and conditions say? If there’s a valid reason to deduct for extra cleaning, make sure you have evidence – photos, cleaners invoice etc.

  • Lesley |

    We have just returned from a great week’s holiday and was all set to give a good review on Trip Advisor. We paid a £300 deposit against breakages, damages, etc, and was expecting a full refund. So we were dismayed to have £52.33 deducted to pay for a new salad crisper drawer, including a charge for time spent sourcing this drawer. We were accused of damaging the drawer and unsuccessfully trying to repair with glue This accusation is totally untrue. We did not damage the drawer and certainly did not attempt to mend with glue. I emailed the owner stating this. I asked for a photo of the damaged drawer, also a note of how much he was charging for time sourcing. Neither of these points has he addressed. He claims we attempted to hide the repair by putting a sheet of kitchen roll in the drawer over the repair. This is so untrue – my practice is always to line salad drawers and fridge doors with kitchen paper to mop up any mess caused by ripe fruit, milk drips etc. I have explained this but the owner refuses to believe me and is adamant he is right to make a charge. He says that the drawer was cleaned before and after our arrival, that it was not damaged before but was damaged when we left, concluding we caused the damage. I can only conclude that previous guests had made a near invisible repair with superglue say, and that, after a week’s constant use by us, the glueing failed. The sum involved is not huge, but we are in effect being called liars. Even if we inadvertently caused the drawer to crack, this does not explain how it came to be glued back together! The owner has the upper hand as he has our money. We are not guilty and don’t want to incur expensive legal fees trying to prove the fact.

  • Peter Townsend |

    I’m a guest relations manager at a high end holiday cottage complex in the Cotswolds. About a 3rd of my owners (after bitter experience) now take a damage deposit, this is done by BACS transfer. The amounts vary from £250 to £500 p/w, rentals are between £800 and £3k per week. This is often an unpleasant side of my business as it can leave a sour taste, particularly when damage is disputed, but my overall impression is that it definitely reduces willful/ careless damage. Sadly, very poor reviews are a consequence. My question is this;
    Is there a scheme whereby guests can pay a deposit into an independent holding account, and the holding company arbitrate small claims on behalf of both the guest / owner in equal measure? I am finding that guests are becoming increasingly nervous about BACs transferring into the owner private account. Obviously this would need funding so the guests could opt for either the secure scheme for a fixed fee, say £20, and the owner could pay an annual subscription, say £100 per year….. just a thought

    • Philip |

      I’m aware that some agencies offer guests the option to take out an insurance policy (£20 ish) to cover damage, instead of taking a damage deposit. I’ll update if I find the details of such policies.

  • Cheryl |

    Myself and my family rented a large country house for a mid-week stay, we vacated the property on a Friday at 10am and the next occupants were due at 4pm the same day (I know this as we requested another night but were unable due to it already being booked) we paid a security deposit of £500 which we have now been told will be retired 14days after departure? This seems like an awfully long time to wait considering the checks would of been done the same day? Seems like a way to make interest on a rather large deposit? Is this normal practice?

    • Philip |

      It’s not unusual. I expect the deposit will be refunded within 14 days.

  • Elaine Pafomow |

    Hi My family and I rented a cottage at the end of May this year and paid £100 damaged deposit. I have not had the deposit returned yet. We left the cottage clean tidy and no damage. I have contacted the owners and at last recieved an email 3 weeks ago to say the check was in the post. I am still waiting for the check. I have again contacted the owners to let them know that I have not recieved it. I have not had a reply. Is there anything else I can do?

    • Philip |

      I would request the refund payment via a bank transfer.

  • Daisy Bell |

    We have successfully pursued a guest through the Small Claims court. This guest was very drunk, vomited all over the carpet which had to be replaced because the vomit had penetrated through the underlay into the floorboards. All bedding had to be replaced as well, plus the cost of loss of rental while it was all put right. The whole place had to be deep cleaned.
    The stench was incredible, and took several days to disappear.
    The guest’s view was that we should claim on our insurance; ours was that the person who did the damage should pay. The court agreed, and we were paid over £2,000 in compensation.

    • Philip |

      How unfortunate, but what a great outcome for you and well done for seeing it through.

  • Lisa |

    We’ve booked a holiday let of £900 pw and booking terms stated security deposit £100 plus £25 for a dog, no other rules stated on booking.

    Email from owner a day before we go and stay that the security deposit is £600 and they reserve the right to refuse same sex groups. Hmm dicing with the law there regarding gender, how about the late change of security deposit amount? Now strict rules about the dog, only allowed 1 room of house. Surely terms need to be stated up front prior to paying so guests can make a informed choice?

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