Any tenancy deposit paid to a person in connection with a shorthold tenancy must be dealt with in accordance with a scheme authorised by either the Secretary of State or the Welsh Assembly (Housing Act 2004, s.213). This provision means that all landlords and agents must ensure that deposits are safeguarded by a tenancy deposit scheme (TDS). Landlords, agents or tenants cannot avoid the legislation by agreeing that a deposit should not be safeguarded by a scheme. If a deposit is required the landlord or his agent must comply with the provisions. Within 30 days of the landlord or his agent receiving a deposit he must ensure that the deposit is safeguarded by an authorised TDS and give the tenant and, if relevant, the person who paid the deposit, prescribed information as to which scheme is safeguarding their deposit, how the scheme's initial requirements have been met and details of the relevant legislation which protects their deposit. The Housing (Tenancy Deposits) (Prescribed Information) Order 2007 (S.I. No. 797) provides that, inter alia, such information must include details as to repayment of a deposit and as to the procedure when there is a dispute about the amount to be paid or repaid.
A deposit cannot consist of property other than money (s.213(7)).
If a court finds that a landlord has failed to comply with these requirements it must order the landlord to pay to the tenant, within 14 days, a sum of up to three times the amount of the deposit, as well as either repaying the deposit or paying it in to an authorised custodial scheme (s.214).
At any time when a deposit is not being safeguarded in accordance with an authorised scheme, or certain requirements are not being met, the landlord cannot give a valid s.21 notice (see 41 Recovery of possession, above), and so cannot recover possession (s.215). The same applies at any time while a landlord is holding a deposit which can not lawfully be required, i.e., one which consists of something other than money.
Further details about tenancy deposit schemes are contained in the Housing Act 2004, Schedule 10, as amended by the Housing (Tenancy Deposit Scheme) Order 2007 (S.I. No. 796).
A tenancy deposit is a sum of money held as security for the performance of any of an occupant’s obligations arising under or in connection with a tenancy or an occupancy arrangement, or the discharge of any of their liabilities which so arise. A tenancy deposit scheme is a scheme for safeguarding such tenancy deposits paid in connection with the occupation of any living accommodation (Housing (Scotland) Act 2006, s.120).
The Scottish Ministers may approve a tenancy deposit scheme devised by them or by any other person but any approval must be given in accordance with the tenancy deposit regulations then in force (see 32 The Tenancy Deposit Schemes Regulations–Scotland, below). Before approving a tenancy deposit scheme, the Scottish Ministers must (s.122)–
(a) publicise the terms of the proposed scheme, and
(b) consult (i) such persons representing landlords or tenants whom they think may be affected by the proposed scheme, and (ii) such other persons as they think fit, about the proposed scheme.
The Scottish Ministers must review each approved tenancy deposit scheme from time to time and may, following any such review, take steps to secure the revision of the reviewed scheme, or withdraw their approval of it.
The Scottish Ministers may approve different tenancy deposit schemes for different types of tenancy or occupancy arrangement, or more than one tenancy deposit scheme for the same type of tenancy or occupancy arrangement.
The Scottish Ministers may by regulations (“tenancy deposit regulations” (see 32 The Tenancy Deposit Schemes Regulations–Scotland, below)) set out conditions which a tenancy deposit scheme must meet before they can approve it, and make such further provision about tenancy deposit schemes as they think fit (s.121).
Tenancy deposit regulations may, in particular–
(a) make provision about the manner and circumstances in which tenancy deposits must be paid, held and repaid under an approved scheme;
(b) impose sanctions for failing to participate in, or to comply with, an approved scheme;
(c) set out a mechanism for resolving disputes relating to an approved scheme;
(d) prescribe the type of person who may administer an approved scheme,
(e) authorise the Scottish Ministers to make payments, or to give guarantees or other assistance, in connection with (i) the creation, administration or operation of an approved scheme, or (ii) the resolution of disputes relating to an approved scheme;
(f) set the amount, or the maximum amount, of any fee which may be charged in connection with an approved scheme; and
(g) prescribe arrangements for publicising approved schemes.
The Tenancy Deposit Schemes (Scotland) Regulations 2011 set out the conditions which tenancy deposit schemes must meet and establishes the regulatory framework for such schemes. A landlord who has received a tenancy deposit in connection with a relevant tenancy must, within 30 working days of the beginning of the tenancy (Reg. 3(1))–
(i) pay the deposit to the scheme administrator of an approved scheme;
(ii) provide the tenant with certain specified information.
The information that must be provided is (Reg. 42)–
(iii) confirmation of the amount of the tenancy deposit paid by the tenant and the date on which it was received by the landlord;
(iv) the date on which the tenancy deposit was paid to the scheme administrator;
(v) the address of the property to which the tenancy deposit relates;
(vi) a statement that the landlord is, or has applied to be, entered on the register maintained by the local authority under s.82 of the Antisocial Behaviour etc. (Scotland) Act 2004 (see Housing:Regulation of Landlords);
(vii) the name and contact details of the scheme administrator of the tenancy deposit scheme to which the tenancy deposit was paid; and
(viii) the circumstances in which all or part of the tenancy deposit may be retained at the end of the tenancy, with reference to the terms of the tenancy agreement.
The landlord must ensure that any tenancy deposit paid is held by the scheme from the date it is first paid until it is repaid in accordance with the Regulations following the end of the tenancy (Reg. 3(2)). A tenant who has paid a tenancy deposit may apply to the sheriff for an order where the landlord has not complied with any duty under Reg. 3 in respect of that deposit. An application must be made by summary application and must be made no later than three months after the tenancy has ended (Reg. 9). If satisfied that the landlord did not comply with the duty the sheriff must order the landlord to pay the tenant an amount not exceeding three times the amount of the tenancy deposit. The sheriff may, as he considers appropriate in the circumstances of the application, order the landlord to pay the tenancy deposit to an approved scheme or provide the tenant with the information required under Reg. 42 (Reg. 10).
The Regulations also set out the conditions which a scheme must meet before it can be approved. Inter alia, the person who acts as scheme administrator must be a fit and proper person to do so (Reg. 7). A scheme must be based on the following model (Reg. 11)–
(ix) no fee is payable by the landlord to the scheme administrator in respect of participation in, or otherwise in connection with, the scheme;
(x) the tenancy deposit is paid by the landlord to the scheme administrator;
(xi) the scheme administrator pays the tenancy deposit into an account maintained for the purpose of holding tenancy deposits;
(xii) the tenancy deposit is held in that account until it falls to be repaid in accordance with the Regulations.
A tenancy deposit scheme must be available to all landlords and their tenants and an appropriate customer service facility must be made available for handling enquiries in relation to the scheme and for dealing with complaints (Reg. 13). A scheme must operate on the basis of a business plan which ensures it is self-financing and supports the sustainability of the scheme (Reg. 14). Scheme procedures must protect deposits in the event of scheme failure (Reg. 15). The Regulations also sets out accounting requirements and make provision concerning designated accounts (Regs. 16 to 19).
A landlord must apply to the scheme administrator for repayment of any tenancy deposit paid to an approved scheme on, or as soon as is reasonably practicable after, the end of the tenancy. The tenant may apply for repayment of the deposit, but if an application for repayment has been made by the landlord, or is made within 30 working days of the tenant’s application, the scheme administrator must not progress the application (Reg. 24).
A dispute resolution mechanism must be made available free of charge for the landlord and tenant. It must not be compulsory, but the tenancy deposit scheme must require a landlord who has submitted a deposit to it to use the dispute resolution mechanism in any case where the tenant requests a referral (Regs. 33 to 39).
The scheme administrator has a duty to publicise approved schemes and to produce information leaflets before such schemes become operational (Regs. 40, 41).