Tenancy Deposit Schemes
What is a tenancy deposit scheme?
A tenancy deposit scheme (TDS) is an independent third party scheme which has been approved by the Scottish Government to hold and protect tenant deposits until they need to be repaid at the end of the tenancy.
Ensuring a tenant’s deposit is transferred into a TDS is now a legal requirement in Scotland.
In the case of landlords who take our Full Management Service 1LET deal with all aspects of TDS on the landlords behalf. This includes transferring the tenant’s deposit, at the appropriate time, into one of the three Government approved schemes; managing any deductions at the end of the tenancy; liaising with tenants; preparing and providing evidence to the TDS should a tenant(s) dispute any proposed deductions.
In the case of landlords who choose our Self-Managed Service, 1LET transfer the deposit funds to the landlord who in turn must then comply with TDS regulations.
What are the benefits of having a scheme?
• Tenancy deposits will be protected by an independent third party. This will prevent deposits from being unfairly held by landlords or letting agents.
• Schemes will be free. There will be no charge for tenants, landlords or letting agents to join a scheme.
• Quick repayment of deposits. Where a landlord and tenant agree about the return of the deposit the scheme administrator must return the deposit within 5 working days.
• Free access to an independent dispute resolution service. Every approved scheme will provide a free service to resolve disagreements over the return of deposits as an alternative to taking legal action through the courts.
• Provision of information. Landlords must give the tenant key information about the tenancy, the deposit and the scheme that safeguards the deposit. Schemes will also provide information about the protection of deposits and their services to tenants and landlords.
• Sanctions for non-compliance. A tenant can apply to a sheriff for a financial penalty to be imposed on a landlord if they fail to submit deposits to an approved scheme and/or provide information to the tenant.
• Improved professionalism of the private rented sector.
The introduction of a scheme will push up standards in relation to management of deposits.
When will tenancy deposit schemes be available?
Tenancy deposits schemes commenced on 2 July 2012. The three schemes that have been approved by the Scottish Ministers are:
- The Letting Protection Service Scotland
- Safe Deposits Scotland
- My Deposits Scotland
Which landlords must comply with a scheme?
Most landlords who let privately rented property are required to register with the local authority in which the property is situated.
Every landlord who receives a deposit, and who is required to register in the local authority register of landlords (in accordance with the Antisocial Behavior etc. (Scotland) Act 2004) must comply with the Tenancy Deposit Schemes (Scotland) Regulations 2011.
This includes landlords of assured and short assured tenancies, university accommodation, as well as various other types of occupancy arrangement.
What does this mean for landlords?
The regulations require that a landlord must pay deposits into an approved scheme and ensure that the money is held by an approved scheme for the duration of the tenancy. Evidence of registration with the relevant local authority must be provided when the deposit is paid over. (Regulations 3 and 44 apply).
The tenant must also be provided with specific information about the tenancy, the deposit and the scheme that will be protecting it. (Regulations 42 and 43 apply).
What happens if a landlord doesn’t comply with the tenancy deposit legislation?
A tenant can go to a sheriff to take action against a landlord who doesn’t protect the deposit with a scheme or provide the required information within the specified timescales.
Where satisfied that a landlord has not complied, a sheriff can order the landlord to pay the tenant up to three times the deposit. Discretion as to the amount of any financial penalty can be applied.
Advice agencies and local authorities will be able to offer guidance and support to a tenant who wishes to take action against their landlord over a tenancy deposit.
What happens if a landlord uses a letting agent?
A landlord can still use an agent to act on their behalf to manage a tenancy, as happens now. However, the duties in relation to tenancy deposits ultimately apply to the landlord, as the person requiring the deposit.
This means that any sanctions imposed by a sheriff will apply to the landlord. It will be in the interests of any landlord who employs a letting agent to act on their behalf to satisfy themselves that they act in accordance with the Regulations.
The landlord may take action against the agent through the court if there has been a breach of contract, as is the case now.
Further Information on Tenancy Deposit Schemes
More detailed information about tenancy deposit schemes can be found in the Frequently Asked Questions documents for tenants and landlords and letting agents, published on the Scottish Government website.
Links to individual scheme providers are available below: