Legislation Matters: Deposit Scheme

The Tenancy Deposit Scheme Regulations (Scotland) 2011 came into force last year and imposed specific duties on landlords with regard to tenants’ deposits. In terms of the regulations the landlord has two specific duties:-

• to lodge any deposit received from a tenant with an approved tenancy deposit scheme no later than 30 days after the start of the tenancy; and
• to provide prescribed information regarding the deposit, the tenancy and the scheme to the tenant within the same timescale.

It is important to note that the duties apply to existing tenancies as well as new tenancies. If a landlord has failed to comply with either duty, the tenant can apply to court asking for an award of up to three times the amount of their deposit. The regulations are clear that where a landlord has failed in either duty, the court has no discretion – the landlord must face a financial penalty. The only question for the court will be the level of award.
The court’s discretion in this regard has been highlighted by two recent decisions from Edinburgh Sheriff Court.

In the case of Fraser and Pease v Meehan, the landlord had failed to lodge the deposit with a scheme and had failed to provide the information to the tenants. He pleaded ignorance, stating that he resided in Australia and was not aware of the regulations and the duties that came with them. It was however noted that he had previously been employed by a letting agent in Edinburgh and accordingly would have had some knowledge of the sector.
The Sheriff commented that the regulations had been introduced to address a “perceived mischief” and would be meaningless if they were not rigorously enforced. The landlord had provided no proper explanation for his failure to comply with his duties under the scheme. In the circumstances, the Sheriff awarded the tenants the maximum penalty of three times the deposit. This amounted to £3450. The tenants were also awarded the expenses of the court proceedings.

In Smith and Carse v Chan, the situation was slightly different. The landlord had instructed an agent to act on his behalf. His agent had lodged the deposit with an approved scheme. However, when sending out the required
information to the tenants, the agent had misspelled the postcode in the address. The landlord argued that by instructing his agents to provide the information, he had complied with his duties under the scheme. In any event, it had simply been an administrative error. The Sheriff was however satisfied that there had been a failure to comply with the duty to provide information albeit the deposit had been lodged. Sending out the paperwork with an incorrect address did not constitute a provision of information to the tenant. Accordingly, the Sheriff had to award a payment to the tenants. He did however take into account the circumstances of the case and
calculated a sum of £775 which was the equivalent of the deposit paid.

The court has confirmed in these two cases that the regulations are clear – ignorance will not be an excuse and where there has been a failure to comply with the landlord’s duties under the scheme, either in whole or in part, the landlord will face a penalty. However where there is a satisfactory explanation for the landlord’s failure, there may be some leniency on the court’s part.

Source Citylets Report Q3