Landlord Legal Update – for the real Northerners (…Scotland)

Are you looking for a legal update in relation to landlord matters north of the border, in particular the tenancy deposit scheme? We’ve been regular readers and admirers of the Property118 blog for some time and have always had the strange idea that perhaps something was missing. We now think it might be the lack of blog articles from someone in Scotland. To those of you who don’t know, Scotland is that bit of Britain which is much further north than the area that everyone in London calls “the North”. As someone who lives in a place where Manchester is 200 miles to the south, I always find it highly amusing to hear Mancunians called “northerners”.

Leaving all that aside, we do have a thriving and burgeoning private rented sector in Scotland and our firm acts for a large number of private landlords trying to help them tiptoe their way through the maze of laws and regulations which exist in the sector.

Over the last 12 years, the newly established Scottish Parliament has added significantly to the burden imposed upon private sector landlords by introducing a number of new laws and changes to the existing regime.

Over the last few months, two of my colleagues have been travelling round Scotland conducting legal update seminars for private landlords. These sessions have been conducted in conjunction with the Scottish Association of Landlords. They have been very well attended, which suggests there is a growing appetite amongst private sector landlords to get legal updates and perhaps more importantly attend a forum where they can ask questions.

Tenancy Deposit Scheme

It is clear from these sessions that one of the current hot topics for private sector landlords in Scotland is the imminent introduction of a Tenancy Deposit Scheme. The relevant legislation for this scheme was contained in the Housing (Scotland) Act 2006 but its introduction has been delayed until this year. The Scottish Government have now passed the relevant regulations which will allow the scheme to come into effect.

• To date, three companies have indicated an interest in running a tenancy deposit scheme in Scotland.
• The Government are presently consulting on the various proposals and hope to have the first scheme approved by the end of March.
• The actual scheme will not come into force until later this year as the Government will require to publicise the existence of the scheme and to encourage landlords and tenants to use it.

The proposals in Scotland do not allow the deposit schemes to be worked by means of insurance backed guarantees. The tenancy deposit scheme will:

• require an actual deposit to be paid to the deposit scheme and to be held by the deposit scheme.
• not allow any fees to be charged by the organisations running the tenancy deposit scheme.
• be required to cover the costs of running the scheme and make a profit simply by investing the funds which they hold.

Once the tenancy deposit scheme is running, landlords will be required to remit the deposits to the scheme administrators.

The main queries which have arisen relate to the return of deposits at the end of a tenancy. The tenancy deposit scheme has a dispute resolution process and if landlords and tenants do not agree the amount of deposit to be returned at the end of the tenancy then the tenant can ask for the matter to be referred to the adjudication process.

It is still open to tenants to go to court to seek return of the deposit but landlords will still be required to co-operate with the adjudication service if such a dispute is raised by the tenant. There are timescales in connection with the use of the dispute resolution scheme and the regulations indicate that use of this service is also to be free for tenants and landlords. Accordingly the operators of the tenancy deposit scheme will also require to provide such a service from the scheme’s running costs. The regulations allow the adjudicator’s decision to be challenged only on the basis of an error in law.

To date, three organisations who have indicated an interest in running the tenancy deposit schemes in Scotland are all either based or linked to companies already operating in England and running similar deposit schemes. We await with interest the establishment of the first tenancy deposit scheme here in Scotland and look forward to seeing how it operates and whether it does reduce the significant number of disputes and complaints which arise at the end of tenancies in connection with the use of deposits currently held personally by landlords or their agents.

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