Practitioner Article Tenancy Deposit Schemes in Scotland Written by Rebecca Johnston, Operations Manager, SafeDeposits Scotland October 2012 www.shelter.org.uk. All rights reserved. This document is only for your personal, non-commercial use. You may not copy, reproduce, republish, post, distribute, transmit or modify it in any way. This document contains information and policies that were correct at the time of publication.
Tenancy Deposits in Scotland Rebecca Johnston, Operations Manager at SafeDeposits Scotland explains the recent change in law around how tenants deposits are dealt with in Scotland. Introduction Landlords in Scotland are experiencing a significant change in the way they handle their tenants deposits. Since July 2 nd 2012, landlords who are required to register with their local authority under the Antisocial Behaviour (Scotland) Act 2004, have to transfer their tenancy deposits to a third party who will hold the money in a designated account for the duration of the tenancy. The Tenancy Deposit Schemes (Scotland) Regulations 2011 came into force on 7 th March 2011, with approved schemes becoming operational on 2 nd July 2012. Similar deposit legislation has been in force in England and Wales since April 2007, but it is important to understand that the Scottish schemes have significant differences. Make sure, when reading about tenancy deposit protection, that you are reading information that reflects the Scottish legislation. What types of tenancy are affected? Landlords who are required to register with their local authority and who take a deposit relating to a tenancy or occupancy arrangement, will have to use a tenancy deposit scheme. Landlords of the following properties are not required to register, so are exempt from using a scheme if all of their properties are: Lets to family members Life rents Houses for holiday use Properties used by religious orders and organisations Accommodation with care Houses subject to control orders Agricultural and crofting tenancies Resident landlords Transitory ownership (executors, heritable creditors, and insolvency practitioners) 2
When to comply The legislation is retrospective, so all current deposits, new and old, will eventually have to be transferred to a deposit scheme. For deposits taken before 7 th March 2011, there are transitional provisions: o Where the tenancy renews, either by express agreement or by tacit relocation, between 2 nd October 2012 and 2 nd April 2013, the deposit should be transferred within 30 days of renewal. o Where there is no renewal between 2 nd October 2012 and 2 nd April 2013, the deposit should be transferred by 15 th May 2013. For deposits taken between 7 th March 2011 and 2 nd July 2012, the deposit should be transferred by 13 th November 2012. Deposits taken after 2 nd October 2012 will have to be transferred within 30 working days of the beginning of the tenancy. Prescribed information After the landlord has transferred the deposit to a scheme, they must give their tenant(s) certain information about their deposit, also within 30 working days of the beginning of the tenancy. Part of the information is to say when the deposit was placed with a scheme, so it will likely be given to the tenant after the signing of the tenancy agreement, not alongside it. All tenants on the tenancy agreement should be given a copy. Sanctions The landlord has a two-part duty under the legislation, detailed above: 1. To place the deposit in an approved tenancy deposit scheme; 2. To give their tenant(s) prescribed information about the deposit. Failure to do either of these things can lead to the landlord being ordered to pay the tenant up to three times the equivalent of the deposit. This is not automatic the tenant would have to make a summary application in the Sheriff Court, within three months of the tenancy ending. 3
Landlord registration An unregistered landlord can use a tenancy deposit scheme. However, all 32 local authorities in Scotland will have access to information about landlords who have transferred their deposits, along with their registration status. Unregistered landlords using a scheme can therefore expect to be contacted by the relevant local authority. Furthermore, part of the landlord s duty is to confirm to their tenant that they are, or have applied to be, a registered landlord. If they cannot do this, they cannot fully complete the prescribed information, detailed above, so could be sued by their tenant under the Regulations. Repayment of the deposit At the end of the tenancy, the landlord should apply to the scheme for the return of the deposit, although the tenant can also make a proposal for repayment. If both parties agree with how the deposit is to be split, the deposit will be repaid within 5 working days of notifying the scheme of their agreement. The landlord must try to come to an agreement with their tenant, in order to avoid arbitration. If the parties cannot come to an agreement, the tenant can choose to use the scheme s free alternative dispute resolution service. Both parties will be asked to submit evidence to support their position, and one of the scheme s independent adjudicators will look at all the evidence and come to a decision about how the deposit should be repaid. SafeDeposits Scotland SafeDeposits Scotland operates an approved tenancy deposit scheme in Scotland. The only not-for-profit scheme, surpluses will be gift-aided to the SafeDeposits Scotland Charitable Trust, a grant-giving charity set up to raise standards in the Scottish private rented sector through education. It is also unique in that it is backed by experienced organisations already working in Scotland s private rented and not-for-profit sectors. It also has the backing of an experienced England and Wales scheme operator: Scottish Association of Landlords Royal Institute of Chartered Surveyors National Federation of Property Professionals (ARLA) Scottish Council for Voluntary Organisations National Union of Students The Dispute Service 4
Further information SafeDeposits Scotland can be contacted through their website www.safedepositsscotland.com, by emailing info@safedepositsscotland.com or by calling 0845 604 4345. Or alternatively send an email to practicescotland@shelter.org.uk. 5