The Tenancy Deposit Schemes (Scotland) Regulations 2011

These Regulations, which came into force on 7 March 2011, make provision about tenancy deposit schemes for the purposes of Sections 120-122 of the Housing (Scotland) Act 2006.

The main objectives of the Regulations are:-

  • To tackle the problem of unfairly withheld deposits;
  • To ensure that deposits are safeguarded throughout the duration of the tenancy; and
  • To ensure that deposits are returned quickly and fairly, particularly where there is a dispute over the return of the deposit, or a proportion of it, to tenant or landlord.

Such schemes require to be approved by the Scottish Ministers and will safeguard tenancy deposits. The Regulations set conditions which schemes must meet before they will be approved and establish the regulatory framework for the schemes.

The Regulations impose duties on landlords to pay a tenancy deposit to an approved scheme, to provide information to the tenant, and to ensure that a deposit is held by an approved scheme throughout a tenancy. The scheme administrator must be a fit and proper person and the Scottish Ministers are allowed to give financial assistance in connection with an approved scheme if they wish to do so. There are sanctions for any failures to comply with the duties imposed.

The establishment of a scheme to safeguard tenancy deposits supports the wider policy objective of raising standards of property management in the private rented sector. It compliments other policies such as national landlord registration, voluntary landlord accreditation and the Repairing Standard, which also aim to raise standards in the sector. To add to this, the Property Factors (Scotland) Bill has now also been approved by the Scottish Parliament and will be implemented by October 2012 or earlier.

Nicola McCafferty
Solicitor
Commercial Property

8 thoughts on “The Tenancy Deposit Schemes (Scotland) Regulations 2011”

  1. I have a new tenant that moved to one of my properties does this mean we have to pay the deposit money to a deposit protection scheme or can we still hold the deposit. This would be in Scotland so has the law come into force?

    1. The Tenancy Deposit Schemes (Scotland) Regulations 2011 (“TDS”) came in to force on 7 March 2011. The provisions of the TDS will apply to all private landlords and letting agents.

      The Scottish Government currently estimates that between 800 and 11000 tenants annually have £3.6 million of their deposits wrongly held. The Scottish Government also released the following statement to the Scottish Association of Landlords (“SAL”) in January:

      “… the regulations have been drafted so that the duty to comply will apply to all new relevant tenancies and renewed tenancies on a date 6 months after the first scheme becomes operational. In addition, the duty to comply will also apply to all existing relevant tenancies. However, in recognition of the length of time some of these tenancies may have been in place, and the additional requirements on landlords, the timescale for compliance will be extended to the date 9 months after the first scheme becomes operational. This will allow more time for landlords, agents and tenants to adjust to the new legislative requirements…..”

      In Summary: Landlords and Agents will have to ensure that deposits held are handed over to a custodial scheme: (a) 6 months after the first scheme opens its doors for business for all new and renewing tenancies, and; (b) 9 months after the first scheme opens its doors for business for all existing tenancies.

      It is estimated that the first scheme will not be operational until at least the beginning of 2012.

      The only schemes that will be approved will be custodial, whereby landlords will lodge the deposit with the scheme to ensure it is properly safeguarded. As a result of SAL campaigns, there will be no charge to landlords to lodge a tenant’s deposit with an approved scheme.

      Nicola McCafferty
      Assistant Solicitor – Business

    1. Part 5 of the Regulations state the procedures for payment, holding and repayment of deposits.

      Basically, it is a landlord who must apply to the scheme administrator for repayment of any tenancy deposit paid to an approved scheme on, or as soon as is reasonably practicable after, the end of the tenancy. The landlord’s application must specify the date on which the tenancy ended and the amount of the tenancy deposit which, in the view of the landlord, should be repaid to the tenant and also repaid to the landlord.

      A tenant may also apply for repayment of the tenancy deposit. However, if an application for repayment has already been made by the landlord, or is made within 30 working days of the tenant’s application, the scheme administrator will not progress the tenants application and will only deal with the landlord’s application.

      Sections 29 to 32 deal with the repayment of a deposit by the scheme administrator where there is a disputed amount.

      Where the scheme administrator receives notification from the tenant of a disputed amount then the scheme administrator must hold that amount in a designated account until the dispute is resolved. If any proportion of the tenancy deposit is undisputed, the scheme administrator must repay that amount as soon as is practicable.

      If the administrator does not receive from the tenant a request for, or consent to, use of a dispute resolution mechanism made available by the scheme administrator and the tenant does not otherwise agree with the landlord the amounts to be repaid then:- (1) on the fifteen working day after receipt of the notification the scheme administrator must write to the tenant to remind the tenant of the procedure for requesting a referral to the dispute resolution mechanism; and (2) on the thirtieth working day after receipt of the notification the scheme administrator must advise the tenant that the tenancy deposit is to be repaid in accordance with the amounts specified in the landlord’s application and then repay the tenancy deposit in accordance with that application within the next five working days.

      However, if the scheme administrator receives notification that the dispute has been resolved by agreement between the landlord and the tenant, the scheme administrator must repay the tenancy deposit in accordance with that agreement within five working days.

      Part 6 of the Regulations outlines the dispute resolution mechanism.

      A scheme administrator must make available a mechanism for the resolution by an adjudicator of disputes between landlords and tenants about the amount of the tenancy deposit to be repaid to the tenant at the end of a tenancy. The dispute resolution mechanism must be provided free of charge to both the landlord and the tenant. Use of the dispute resolution mechanism must not be compulsory, but the tenancy deposit scheme must require a landlord who has submitted a deposit to it to use the dispute resolution mechanism in any case where the tenant requests a referral. The adjudicator must decide any dispute within twenty working days of receipt of the referral and must then give notice of their decision in writing to the scheme administrator, the landlord and the tenant within five working days of reaching their decision.

      Sections 37 and 38 provide for the occasion where a landlord or tenant require to apply to the scheme administrator for review of any decision reached by the adjudicator, but only on the grounds that the adjudicator has erred in fact or in law (or both).

  2. Is there to be a scheme that will register tenants that have been in default and have had to be evicted? There seems to be much happening to control landlords – but nothing to protect them from bad tenants.

  3. I currently have a dispute with my previous landlord regarding deposit return. I was a tenant until the end of June 2011 – about 2.5 years duration.
    They did not use this deposit scheme.
    Had it come into affect, do I have any legal fire power to challenge them with?
    Best regards,
    Scott

    1. The protection of deposits will vary depending on when the deposit was received and when the first scheme becomes operational.

      From what you have told me I am assuming that you handed over your deposit in January 2007. I note that you ceased to be tenant in June 2009.

      The duty to comply with the regulations will not apply until an approved scheme is in operation. As far as I am aware, the first scheme is still to become operational in Scotland.

      A tenancy deposit scheme will not come into effect until proposals are submitted to Scottish Ministers, when suitable schemes are approved and when a scheme is ready to start receiving deposits. Details of any schemes approved and the dates on which they will become available will be announced in due course.

      The Scottish Government will work with local authorities and other agencies and organisations to ensure that those affected by the proposed regulations are well informed. Those responsible for operating approved schemes must also publicise the schemes across Scotland at the point that they are approved, prior to the scheme becoming operational and for some time thereafter.

      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, one of two timescales will apply:

      1. The deposit is received before 7 March 2011 – the landlord must comply within 30 working days of

      a) the date of renewal of any tenancy which occurs between 3 and 9 months after a scheme first becomes operational, or

      b) in any other case, the date that falls 9 months after the first operational date.

      2. The deposit is received between 7 March 2011 and the date the first scheme becomes operational – the landlord must comply within 30 working days of the date that falls 3 months after the date the first scheme becomes operational.

      I have not come across any guidelines or material in relation to any arguments related to the return of a deposit where the lease has come to an end. I would assume that the Landlord will not be obliged to submit your deposit to a scheme as they will probably have a new tenant in the property now who will be effected by these regulations (or the property may have been sold when you moved out).

      We will not know what effect these regulations will have on Landlords and Tenants until an approved scheme is in operation. There have been no indications of when this will occur.

      Nicola McCafferty, Solicitor, Blackadders LLP

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