Character Cottages

Security Deposit

Character Cottages Asks: "Should You Take a Security Deposit?"

Can you really prove that the current guests broke the dishwasher and that it wasn’t just cumulative wear and tear, or a previous guest who had managed to mask the problem from you?

brokenglass

The question of whether or not to ask your holiday home customers for a security deposit is commonly debated. A quick search on the internet shows that a large number of property owners firmly believe in taking deposits and always ask for around a 20% to 35% cash prepayment. Similarly, many owners, including some of those who list their properties on our site (www.character-cottages.com), don’t require a security deposit. So is there a right answer to the question?

Security Deposit Pros and Cons

A good place to start is by understanding the pros and cons of taking a security deposit, from the perspective of both the holiday home guests and the owners:

Pros

  • The owner has the knowledge that they have cash under their control to cover the cost of any loss or damage (up to the amount of the deposit);
  • The owner may feel that guests will be more careful in their home, if there is a risk that they could lose some of their deposit.

Cons

  • Many guests will simply not make a booking if a security deposit is required, due to their fear of potential exploitation (mostly borne from stories of “buy-to-let” landlords, who have notoriously abused their month-in-advance rent deposits);
  • Guests who have paid a security deposit may not fully enjoy their stay at the holiday cottage, due to a feeling of “walking on egg shells”. This could restrict repeat bookings and referrals from these guests;
  • There is additional administration time for both you and your guests.

Debate

In our experience, damage or breakages incurred during a holiday let can typically be classified as regular, occasional or rare, with classic examples in each category including:

RegularOccasionalRare
Broken glasses Permanent stains on towels or bed linen Broken dishwasher, tumble dryer, TV, etc
Luggage marks on walls Broken bedside lights Broken windows
Missing torches Excessive mess upon departure Broken furniture

The question is, in which of these examples would you withhold money from a guest’s security deposit to cover the rectification cost?

Unless guests are aware that you have expensive crystal glasses or luxury wallpaper, withholding money from a security deposit for “minor” mishaps, such as broken glasses or marked walls, is likely to be considered very petty. In today’s online world, where negative reviews on Trip Advisor can be viewed by all potential guests, use of a security deposit to protect against normal wear and tear could backfire badly.

There is a stronger case for withholding cash from security deposits for the more occasional and more expensive damage, such as permanent stains on bed linen, or where significant extra cleaning is required. Again though, the question is where do you draw the line? What you may perceive as unreasonable damage, a guest may genuinely perceive as fair wear and tear. Is it worth the potential loss of goodwill and negative property reviews to withhold £25 from a guest’s deposit for additional cleaning costs?

Even in the rare event where there is an expensive breakage, it may not always be clear cut as to which guests are at fault. Can you really prove that the current guests broke the dishwasher and that it wasn’t just cumulative wear and tear, or a previous guest who had managed to mask the problem from you? Rather than risk negative publicity for withholding a deposit from a guest who feels hard done by, would you not be better off protecting yourself against this type of damage via your specialist holiday letting insurance policy?

Opinion

In our opinion, the use of security deposits for the luxury end of the holiday letting market is a false economy. Genuine, “malicious” damage is rare and the costs of wear and tear should be factored into the rental rates charged for luxury properties, with insurance taken out to protect against expensive damage from rare events.

In theory, deposits give owners peace of mind against unwanted financial costs, however, we believe that they deter many potential guests, who are wary that the deposit may be abused. Furthermore, withholding cash from deposits can lead to significant disenchantment, especially if guests feel that they have been unfairly treated by the owner, which can lead to negative publicity and lost revenue.

We believe that, where an owner's objective is to maximise their profit, they should avoid security deposits, as the benefits of higher income and guest goodwill levels will outweigh the limited financial protection that withholding cash from guests can provide.

Receive exclusive offers from Character Cottages

 
 

Your details will never be given to any third parties for their marketing. It will only ever be used by us to send you great things.
To find out more, visit our Privacy Notice.