Friday, 30 November 2018

Tenancy deposits ..... what to do

Welcome to the next instalment of The Key Place’s regular Scottish Private Rented Sector regulation updates ..... as there are over 150 laws that apply to renting out a property in Scotland, there is a lot to know to ensure that we are doing thing right.

Today we are discussing tenancy deposits. 

It has been six years since the Scottish Government introduced rules that require all deposits to be held by an independent third party tenancy deposit scheme.  I believe that this was been a huge step forward in introducing some trust into the sector.  At the time, people were saying that it won’t make any difference as all landlords and letting agents were, of course, managing deposits in the correct manner ..... but clearly this was not the case as you only have to look at the number of letting agents that were sold around the time of the introduction of these new rules to think that some of their deposit accounts may not have been full!

Legally, anybody who takes a deposit for a Private Rented Sector property needs to lodge it with a third party Tenancy Deposit Scheme within 30 days of a tenancy starting.  There are three Tenancy Deposit Schemes:
  • Safedeposits Scotland.
  • my deposits scotland.
  • Letting Protection Scotland.

A key point to note is that a deposit is a tenant’s unless the landlord/letting agent prove that the landlord should get some/all of the deposit at the end of a tenancy ..... this can only be done at the end of a tenancy.
At the start of a tenancy, you need to do the following:
  • Take the deposit.
  • Lodge it with a Tenancy Deposit Scheme.
  • Formally tell the tenant you have done this (there is a prescribed form to do this).

During a tenancy, the deposit stays in the Tenancy Deposit Scheme.
At the end of a tenancy, you need to do the following:
  • The landlord/letting agent and the tenant should seek to agree the split of the deposit.
  • If both agree, ask the Tenancy Deposit Scheme to pay out on the basis of the agreed split.
  • If both the tenant and the landlord/letting agent do not agree, then the fun starts .....

If the landlord/letting agent and the tenant do not agree how the deposit should be split, then the case goes to the Tenancy Deposit Scheme’s arbitration systems.  In this case:
  • The landlord/letting agent give the Tenancy Deposit Scheme their view of how the deposit should be split between the landlord and the tenant along with the evidence backing up this view.
  • The tenant does the same thing.
  • Once the Tenancy Deposit Scheme gets this information, it passes it to their arbiter who decides how the deposit is split based on the EVIDENCE only ..... they do not speak to the landlord/letting agent or the tenant.

At The Key Place, we have extensive experience of tenancy deposit schemes including the arbitration process which is the most complicated aspect.  Based on this, here are some helpful hints:
  • Always follow the TDS rules .... there are fines of up to three times the deposit amount if you don’t.
  • The law has been amended recently to make it really clear that money received from a tenant can only be rent or deposit ..... it cannot be anything else whatever name you may give it.
  • Evidence is key to getting any money from a tenant’s deposit
  • Key pieces of evidence are:

      Detailed inventory at the start of the tenancy.

      Check out report at the end of the tenancy.

      Detailed rent records.
  • Arbitration submissions .... these are a wee bit of science and a wee bit of art so it is best to get somebody who has experience of these to manage the process for you.

We at The Key Place are always happy to help with deposit scheme queries, just give us a shout.  

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