Tenancy Deposits Schemes: Pitfalls for Landlords

In the case of tenancies of houses or flats, it is now generally necessary for landlords to place any deposit with an approved scheme.

It is not acceptable for deposits to be retained by the landlord or held by any other third party other than one of the three approved commercial schemes.

The Tenancy Deposit Schemes (Scotland) Regulations 2011 have been phasing-in since March 2011 and have been of universal application since 15 May 2013.

The landlord is not only obliged to place the deposit with an approved scheme. There is also a requirement to notify the tenant of the details of the scheme in question.

The landlord will be in breach if the deposit is not placed with an approved scheme and / or the tenant is not given the required information.

Financial penalties for failure to comply with the regulations

The financial penalties for failure to comply with the regulations are bound to be a concern for landlords. The tenant is authorised to raise a court action and claim an award of compensation totalling up to three times the amount of the deposit.  The regulations seem to require that some compensation must be awarded up to the permitted maximum.

Using a solicitor more viable under the new system than under the previous one

Under the old regime, the value of any claim for return of a deposit (i.e. typically under £3,000) was such that the tenant would usually require to raise a small claim action.

It was not economical to instruct a solicitor to raise such an action and many tenants found the complexities too great.

However, the new system requires any compensation action to be raised as a Summary Application and this makes it much more realistic to think about instructing a solicitor to raise the action on your behalf if you are the tenant because there is much greater scope for recovering court expenses (costs) from the opponent.

As this is relatively new law, the first cases under it are only now beginning to appear in Sheriff Courts. However, the signs are that the courts are taking a strong line against landlords.

If you are a landlord of domestic property it is essential that you should review whether or not you need to comply with the regulations and, if you do, take action before it is too late.

Contact us for help

If you are a landlord or a tenant and require advice about a tenancy deposit, please contact us. An initial chat is free and without obligation. Peter Brash can be contacted via peter@grigor-young.co.uk or on 01343 564813. Alternatively, complete and send us a Free Online Enquiry.