My tenants want to move to a smaller property and plan to give me notice, however they have arrears accrued during lockdown which they cannot pay. If both sides agree can the deposit be used to pay the arrears and if so how is it done?
First agree this in writing with the tenants, then send that to the deposit scheme with their leaving date. The deposit scheme will ask the tenants to confirm the agreement and you will then get what was agreed. In the worst case, the deposit scheme will deduct the due rent from the deposit. Do not forget that a check-out needs to take place and that may result in a further request to the deposit scheme for a deposit deduction for (agreed in writing?) damages in addition to lost rent.
That is what I believe will happen.
Cheer, much appreciated.