Tenancy Deposit Scheme - An Update

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Tenancy Deposit Scheme– An Update

Now that the operational date for the Tenancy Deposit Scheme in Scotlandis known to be 2 July 2012, we can look at actual dates when landlords will need to hand deposits over to one or other of the schemes. These are:-

A) Deposit received prior to 7^th March 2011:

· Where tenancy renewed (either by a new agreement, or by tacit relocation) on or after 2^nd October 2012 and before 2^ndApril 2013

Within 30 days of renewal

· In any other case

By 15th May 2013

B) Deposit received on or after 7^thMarch 2011 and before 2^nd October 2012:

By 13^thNovember 2012

C) Deposit received on or after 2^ndOctober 2012

Within 30 working days of the beginning of the tenancy

Duty to inform the tenant

Landlords must remember that as well as handing over the deposit, they are required to provide certain information to their 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

Although there is currently only one approved scheme – Letting Protection Service Scotland, a further two, SafeDeposits Scotland and http://www.mydepositsscotland.co.ukare under consideration. I understand that the government hopes that either or both of these will also be approved by 2 July.

SafeDepoits Scotlandis a not-for-profit organisation and any surpluses it makes will be gift aided to a related charity, the SafeDeposits Scotland Trust, which will provide grants to promote education, training and best practice in the private rented sector in Scotland.

The members of SafeDeposits are-

• Scottish Association of Landlords (SAL)
• National Federation of Property Professionals (NFOPP)
• Royal Institution of Chartered Surveyors (RICS)
• The Scottish Council for Voluntary Organisations (SCVO)
• National Union of Students Scotland (NUS Scotland)
• The Dispute Service (TDS)

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 claimedto 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 fulldeposit 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!