Tenancy Deposit Schemes in Scotland – What does this mean for landlords?

Taken from www.nfopp.co.uk (The National Federation of Property Professionals)

What do the regulations do?

The Tenancy Deposit Schemes (Scotland) Regulations 2011 became law on 7 March 2011. The regulations set out the framework for the approval of tenancy deposit schemes. This paves the way for potential scheme providers to develop and submit proposals for the operation of tenancy deposit schemes to Scottish Ministers for consideration.

What is a tenancy deposit scheme?

A tenancy deposit scheme is a scheme designed to protect tenants’ deposits by placing them with an independent third party. 

Why introduce tenancy deposit schemes?

The main objectives of requiring deposits to be safeguarded by tenancy deposit schemes are:

·       To end the practice of unfairly withholding deposits;

·       To ensure that deposits are safeguarded throughout the duration of the tenancy;

·       To ensure that deposits are returned quickly and fairly, particularly where there is a dispute over the return of the deposit, or proportion of it, to tenant or landlord.

What will tenancy deposit schemes look like?

  • Tenancy deposits will be protected by an independent third party  Landlords must submit deposits to the administrator of an approved scheme. The deposit will be protected in a designated account until it is due to be repaid.
  • Schemes will be free to landlords  Tenants will not have to pay a charge to their landlord, or to the scheme in order to protect their deposits.
  • Quick repayment of deposits where there is no dispute  Landlords will apply for the return of the deposit when the tenancy ends. The scheme administrator must return the deposit within five working days of obtaining agreement by the tenant.
  • Free access to an independent dispute resolution service  Every approved scheme must provide a way for disagreements over the return of deposits to be resolved.  This service will be available as an alternative option to the tenant taking legal action for recovery of a deposit through the court.
  • Provision of information  Landlords will be required to issue the tenant with key information relating to the tenancy, deposit and the scheme that safeguards the deposit. Approved schemes will also be required to produce an information leaflet detailing their rules and procedures.
  • Provision of information to local authorities  Landlords must provide information about their registration status on submission of a deposit to an approved scheme. This information will be referred to the relevant local authority to assist with identification of unregistered landlords and/or properties.
  • Sanctions for non compliance  Tenants will be able to apply to the court for sanctions to be applied against a landlord who fails to protect deposits and/or provide information in accordance with the regulations.
  • Schemes must be self-financing  Scheme proposals must demonstrate a robust business plan that will enable the scheme to operate without the need for reliance on subsidy from the taxpayer.
  • Performance monitoring and review  Approved schemes will be monitored on a regular basis by means of quarterly and annual reports. A set of Key Performance Indicators have been developed to aid assessment of key activities.

When will tenancy deposit schemes be implemented?

Scottish Ministers are now able to consider proposals for the operation of tenancy deposit schemes, which they will assess against the conditions that are set out in the regulations. 

Once any suitable proposals have been received and approved, details of the schemes and the dates on which they will be available for use will be announced in due course.

What will the regulations mean for landlords?

Once a tenancy deposit scheme is approved, any tenancy deposit accepted by a landlord must be deposited with an approved scheme within 30 working days of the commencement of a tenancy.

At the same time the landlord must ensure that key information is provided to the tenant, including details about the amount of the deposit and the location of the scheme where it is being held.

The deposit will then be kept by the scheme administrator in an account maintained for the purpose of holding tenancy deposits until they are repaid. The landlord must also provide proof of registration with the local authority when the deposit is paid over.

These duties relating to tenancy deposit regulations will not apply until an approved scheme is implemented. 

Which landlords must comply with the regulations?

Every landlord that is required to register in the local authority register of landlords, in accordance with the Antisocial Behaviour etc. (Scotland) Act 2004 (landlord registration), will need to comply with the Tenancy Deposit Schemes (Scotland) Regulations 2011.

This includes landlords of assured and short assured tenancies, university accommodation, as well as various other types of occupancy arrangement. 

When must deposits be protected?

This will vary, depending on when the deposit was received, and when the first scheme becomes operational.

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.

Landlords already holding deposits before a scheme becomes operational must also protect deposits but will be allowed more time to submit them to an approved scheme.

What will the regulations mean for letting agents?

The duties in relation to tenancy deposits apply to landlords, as the person requiring the deposit. This does not mean that the landlord cannot employ an agent to act on his behalf to manage a tenancy, as they do now.

However, it will be in the interests of landlords who employ a letting agent to act on their behalf to satisfy themselves that the agent is acting in accordance with the regulations i.e. submitting deposits to an approved scheme and providing information to the tenant within the required timescales.

Any sanctions imposed as a result of an application by the tenant to a sheriff for non-compliance with the regulations, would apply to the landlord. The landlord may take action against the agent through the court if there has been a breach of contract, as is the case now.

Further information

Information about the regulations and tenancy deposit schemes can be found on the Scottish Government website at http://www.scotland.gov.uk/Topics/Built-Environment/Housing/privaterent

A copy of the Tenancy Deposit Schemes (Scotland) Regulations 2011 can be found on the UK legislation website at www.legislation.gov.uk.

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