Tenancy Deposit 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 were phased in from 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 claim and seek 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.
Employing a solicitor is probably not financially viable if you are involved in a tenancy deposit claim.
Under the pre-2011 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.
From 2011, however, the new system initially required any compensation action to be raised in the Sheriff Court as a Summary Application and this mad it much more realistic to think about instructing a solicitor to raise the action on your behalf if you were the tenant because there was much greater scope for recovering court expenses (costs) from the opponent.
Various Sheriff Court decisions indicated that the courts were taking a strong line against landlords.
But the position has changed again, from 01 December 2017, with the removal of most private domestic tenancy issues (i.e. tenancies without a local authority or social landlord) from the jurisdiction of the Sheriff Court. Instead, these are now under the supervision of the First-tier Tribunal for Scotland (Housing and Property Chamber).
Given the costs regime which applies in the First Tier tribunal, it will not generally be financially viable to instruct a solicitor to make or defend a tenancy deposit claim. You will have to rely on more “self-help” remedies, as described below.
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.
How to get help
If you are a landlord or a tenant and require advice about a tenancy deposit case, we suggest contacting the CAB or referring to the information on the mygov.scot website (for example, here).