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Tenancy Deposit Protection Heads North of the Border

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.

3 Comments

  • Peter Smith 4th August 2010 at 10:27 pm

    Although I am a landlord in Wales, I have responded to this consultation. To most questions I have replied, “See Q.27” and at that point I have written:

    “Overall you are following the English approach with some improvements. But this is the WRONG approach, creating unnecessary bureaucracy, conflict, and income for lawyers. The basic element of a scheme that is just to tenant and landlord is one in which the tenant pays the deposit to the scheme and presents a certificate of deposit to the landlord. The landlord MUST accept this as his guarantee. At the end of the tenancy both parties must sign the deposit off for payment to tenant or landlord or an agreed division or must submit to arbitration. There must be rules to prevent one party not responding just to be obstructive. With agreement a deposit could also be transferred to a new tenancy quickly and easily. No failures to protect, no penalties, far less ill feeling, no tenants rushing to court to get a quick profit as in England. Empowering to tenants, just to landlords. This would be a FAR better solution than the abortion in England and Wales and be a feather in Scotland’s cap. Being just a bit better than England isn’t good enough.”

  • Kevin Firth 9th August 2010 at 12:15 pm

    I was reading this article with interest and was wondering who you spoke to at the DPS that gave you the impression that :-

    “None of the three organisation operating in England & Wales have been especially keen to expand their operations up north.”

    Many thanks

    Kevin FIrth (Director)

    • PainSmith 9th August 2010 at 12:38 pm

      We will not disclose our sources save to say that the comment did not come directly from the DPS. However, none of the extant scheme have indicated any intention to operate in Scotland despite the deposit protection regulations there being well trailed. We apologise if this misrepresents the DPS position and are happy to retract the statement and if it is the case that DPS are intending to bid to operate a tenancy deposit protection scheme in Scotland. It is our view that it would be better if a scheme that already operates in England & Wales were also to operate in Scotland as this will provide any such scheme with a far more substantial financial basis and will also assist in the sharing of experience.

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  • […] to make less of a hash of it than south of the border. You can read a resume from Painsmith's at Tenancy Deposit Protection Heads North of the Border Painsmith Landlord and Tenant Blog The Scottish Government has published a consultation with an online response form at [ […]

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