The Scottish Executive has published a consultation, including draft regulations, for the operation of tenancy deposit protection schemes in Scotland.
Unlike in England & Wales the protection scheme in Scotland is intended to apply to all residential tenancies, not just Short Assured Tenancies under the Housing (Scotland) Act 1988. This means that the protection regime will also include lettings to companies. However, the scheme only applies to monetary deposits so where a company offers (and the landlord will accept) a guarantee the scheme will not apply. There is no maximum rent threshold under the Housing (Scotland) Act 1988 so there will be no exception for high value tenancies either. Holiday lettings will fall outside the legislation and there may be a raft of further litigation as to what constitutes a holiday for this purpose.
The proposals look to have benefited from experience in England & Wales. The draft regulations are detailed and consideration has clearly been given to closing loopholes. One issue remains somewhat unclear however. The consultation and the draft scheme rules both make reference to the deposit being lodged within 30 days. However, the regulations as drafted appear to allow the tenant to begin Court action immediately. This is probably something that needs to be addressed.
Implementation will occur 6 months after the regulations come into force and all new tenancies created after that point or tenancies which are renewed (either explicitly or by way of tacit relocation) will have to comply with the new procedures.
Penalties for non-compliance are similar. On application the Court can order the deposit to be protected or returned. The Court is also empowered to award a sum not exceeding three times the sum of the deposit to be paid to the tenant. This means that the Court has a discretion in relation to the actual size of the award which will negate the charge unfairness which has been laid against the mandatory penalty south of the border.
The regulations appear to envisage the existence of both custodial and insured schemes. This is a bit of a problem as we are not aware of any party who is interested in running a deposit scheme in Scotland. None of the three organisation operating in England & Wales have been especially keen to expand their operations up north. In addition the size of the private rental sector in Scotland is far smaller and it is debatable whether it is large enough to support more than one scheme, particularly if that scheme is only operating in Scotland. There appears to be a recognition of this issue implicit in the regulations as they state that they cannot come into force until a scheme has been approved by the Scottish Executive. This may be a recognition of the difficulty that the Executive may have in persuading an organisation to operate such a scheme.
The consultation contains a series of questions and is open for comments until 3 October 2010.