Tenancy Deposit Scheme
In a previous blog here I outlined the two contenders to run the scheme in Scotland, The Letting Protection Service Scotland and SafeDeposits Scotland. In today’s blog I’ll run through the procedures landlords will need to use when lodging deposits and seeking return of the money, and also look at what provisions there are if landlord and tenant disagree on the amount of deposit to be retained, but first I need to provide an update to that first blog.
My Deposits Scotland has also now applied to run the scheme and is under consideration by the Scottish Governement. My Deposits Scotland is a partnership between the National Landlords Association (NLA) and Hamilton Fraser Insurance, and is an offshoot of My Deposits, a Tenancy Deposit Protection Scheme authorized by the UK Government to operate a scheme in England and Wales.
So there are now three contenders for the scheme in Scotland. A decision on which of these three will be appointed is expected by the end of March, and the scheme should become operational about a couple of months after that.
Moving on to the subject of today’s blog, how the schemes will operate and what are the penalties for non-compliance.
When do landlords need to hand the deposit over?
This will depend on whether the tenancy commencement date (in terms of the Regulations the date the landlord received the deposit) before or after the scheme commences
All deposits received after a scheme first becomes operational must be submitted to an approved scheme, and information provided to tenants within 30 working days of the start of the tenancy.
Where the deposit was received before a scheme first becomes operational, things are a wee bit more complicated and one of two timescales will apply:
1. Where the deposit was received before 7 March 2011 then:
a) if that tenancy is renewed at a date between 3 and 9 months after the operational date of the scheme, then you must submit the deposit within 30 working days of that renewal date
b) in any other case, you must submit the deposit within 30 working days of whatever date falls 9 months after the operational date.
2. Where the deposit is received between 7 March 2011 and the date the first scheme becomes operational - you must comply within 30 working days of the date that falls 3 months after the date the first scheme becomes operational. (It’s actually simpler than it sounds to work that out! Legislators seem to like complexity!)
It should be noted that the definition of 'working days' does not include Saturdays, Sundays or bank holidays.
Duty to inform the tenant
Landlords are responsible for ensuring that the following information is provided to the tenant:
1. Confirmation of the amount of the deposit paid by the tenant and the date on which it was received by the landlord;
2. The address of the property to which the deposit relates;
3. The date on which the deposit was paid to the scheme administrator;
4. A statement that the landlord is registered with the local authority;
5. The name and contact details of the administrator of the tenancy deposit scheme to which the deposit was paid; and
6. The circumstances in which all or part of the tenancy deposit may be retained at the end of the tenancy, with reference to the terms of the tenancy agreement.
At the end of the tenancy
Either the landlord or the tenant can apply to the deposit holder for the return of the deposit, either in full or in part. If the landlord wishes to claim part of the deposit he should state in his application why he feels that to be justified. The scheme administrator will then write to the other party asking whether or not they agree. If they do, all is straightforward and the deposit will be returned to the party claiming it within 5 working days of that agreement. So it would be sensible for landlords to discuss any proposed claim from deposit with their tenants, and try to reach agreement with them before application is made so that the formal process runs smoothly and quickly.
If a landlord has applied for the deposit (for example, to fund the cost of damage caused by the tenant) and the tenant fails to respond, the scheme operator will pay the amount claimed to the landlord after 30 working days, retaining the balance in the scheme in case the tenant follows up at a later date.
Where the tenant has applied for the deposit and the landlord doesn’t agree but doesn’t make an alternative proposal within 30 working days, the full deposit is repaid to the tenant within 5 working days of the end of the 30 day period. So if you don’t agree that your tenant is entitled to have the whole deposit back, you must submit your reasoned case to the scheme administrator within 30 days of the date of his notification letter.
If you’re a landlord you need to make sure that anything you might want to claim for, such as the last month’s rent not being paid, or your costs in cleaning carpets, or your time in purchasing replacement contents which have been damaged by the tenant, is set out in your tenancy agreement, otherwise the decision will be at the discretion of the scheme administrator. In the same vein you must have a thorough and detailed inventory and record of condition agreed with your tenant (and signed by both parties) at the start of the tenancy.
Disputes
If the parties can’t agree on the amount to be returned to the landlord, then the legislation provides for reference to a dispute resolution service at no cost. The scheme administrator must be satisfied that the parties have attempted to resolve the dispute and have been unsuccessful in doing so, before referring a case to dispute resolution. The adjudicator will make a decision about how the deposit should be repaid, based on evidence provided by you and the tenant, including what is provided for in the tenancy agreement. So landlords and tenants need to have evidence which is reliable, or they will fail to convince the adjudicator of their case. The adjudicator must decide any dispute within 20 working days of receiving the referral.
After a decision is notified, both parties will have 10 working days to request a review. For a review to take place, the parties (or one of them) would need to be able to establish that the adjudicator had made a factual error, for example by overlooking relevant evidence, or had failed to follow the statutory procedure correctly.
Sanctions for failure to comply
If a deposit is not paid to an approved scheme within the required timescale, or if the landlord doesn’t provide the tenant, again within the statutory timescale, with the required details about where his deposit is being held, the tenant may apply to the court for sanctions against the landlord.
If the sheriff is satisfied that you the landlord has failed as above, then he must require the landlord to make a payment to the tenant and this payment can be up to three times the amount of the deposit. In addition he may order the landlord to submit the deposit to an approved scheme. These sanctions could therefore cost a negligent landlord dear. It seems to me that there’s an incentive there for tenants to take a keen interest in how their deposit has been handled (and we should find many more landlords applying for local authority registration)
It’s worth stating again that these obligations fall on landlords and not agents, so if you’re a landlord using an agent to manage your properties you will need to ensure that the agent is doing all of this correctly on your behalf, ideally by having the point covered in your service agreement so that you have redress if there’s a problem.
I hope that wasn’t too dry a read, and I’ll be happy to answer any questions. Just get in touch!
John Gell
Director, Simply Let
9 March 2011
