The Scottish Government has recently announced that the new Tenancy Deposit Scheme, which will be compulsory for all landlords in Scotland, will launch from 2 July 2012. This legislation was passed in March 2011 and states that all tenants in Scotland must have their deposits protected in a government-approved scheme from the operational date. This includes current tenancies, and landlords should be aware of it whether they use an agent or not – if the deposit is not placed in the appropriate scheme on time then the landlord (not the agent) will be held responsible and could become the target of enforcement action.
From 2 July 2012, the law will require that the tenant’s full deposit is sent to an approved custodial scheme within 30 days of a new tenancy commencing. Landlords with existing tenants are, however, being given a window of three or nine months (depending on the tenancy start date) to move their deposit to the scheme. Unlike in England and Wales, there are no options – the full deposit must be transferred into the scheme within strict timeframes.
Failure to do so could result in the tenant being awarded a payment of up to three times the amount of the deposit, depending on what the court decides. Not only that, but if the landlord continuously avoids transferring the deposit, the local authority can also review and revoke their permissions under the Landlord Registration Scheme. Continuing to rent properties without being properly authorised could result in fines up to £50,000.
At the end of the tenancy a deposit will be returned within five days if it is undisputed. If there is a dispute over the amount to be refunded, the case may have to go to adjudication, causing delays in the repayment, the remarketing, and the subsequent re-letting of the property.
Whilst one scheme has been approved by the government for operation from 2 July 2012, it is expected that two other schemes will also be in operation by the deadline. Additionally, in order for landlords and letting agents to have time to adjust to the new way of dealing with tenancy deposits, the Tenancy Deposit Schemes (Scotland) Regulations 2011 sets out transitional timescales for landlords to comply:
1. Deposit received by Landlord/Agent prior to 7 March 2011 and tenancy renewed after 12 November 2012
Must be lodged with an Approved Scheme within 30 working days of the renewal.
2. Deposit received by Landlord/Agent prior to 7 March 2011
Must be lodged with an Approved Scheme within 9 months plus 30 Working days - 2 July + 9 months + 30 working days = 14 May 2013
3. Deposit received by Landlord/Agent on or after 7 March 2011 and before 2 July 2012
Must be lodged with an Approved Scheme within 3 months plus 30 working days - 2 July + 3 months + 30 working days = 12 November 2012
4. Deposit received on by Landlord/Agent on or after 2 July 2012 and before 2 October 2012
Must be lodged with an Approved Scheme within 3 months plus 30 working days of that date - 2 July + 3 months + 30 working days = 12 November 2012
5. Deposit received on or after 2 October 2012
Must be lodged with an Approved Scheme within 30 working days of the beginning of the tenancy.
Details of the individual schemes can be found on the websites below. E-mail addresses are included where available:
If you have any questions about the new Tenancy Deposit Scheme, buy-to-let properties, or any other aspect of the residential rental market, please contact Ian Gray, Head of Residential Property, at email@example.com.