Alan Cameron | Partner

Deposits and Disrepair

The Tenancy Deposit (Scotland) Regulations 2011 came into force on 7 March 2011. Since then, landlords have required to secure a tenant’s deposit in an approved safe deposit scheme within 30 working days of the start of the tenancy agreement. The landlord also has a duty to provide the tenant with specific information regarding the scheme within that time period. The deposit must also be secure within a scheme for the duration of the tenancy. The schemes became operational in July 2012 but there is still some ambiguity in relation to what the rules mean for both landlord and tenants.

There are three approved scheme operators in Scotland:

  1. Letting Protection Services Scotland
  2. SafeDeposits Scotland
  3. My|deposits Scotland

It is important for both parties to keep accurate records of deposits paid under tenancy agreements. We have seen cases where a landlord’s standard lease will not provide for a deposit only for the tenant to allege during an action for recovery of possession and or payment of rental arrears, that a deposit was in fact paid at the beginning of the tenancy. It is then for the landlord to prove that either (i) no deposit was taken or (ii) the deposit was placed into an approved scheme within the required time period. If the landlord fails to place the deposit in a scheme within the 30 day period, the tenant is entitled to raise a claim for as much as three times the deposit. That is obviously a difficult scenario for a landlord to find themselves in particularly if they are in the process of making a claim against the tenant for repayment of unpaid rent.

The schemes are not designed to create an unnecessary burden for the landlord, they are designed to assist where a dispute arises at the end of a tenancy, particularly in relation to unpaid rental or repairs required to the property. At the end of the tenancy, the landlord must submit a claim to the scheme noting whether any sums are to be deducted. The landlord requires to do so within 30 working days of tenancy coming to an end, failing which the whole of the deposit can be returned to the tenant. If the landlord and tenant cannot come to an agreement over deductions, both parties will be referred to the scheme’s dispute resolution process. The tenant has no obligation to use the dispute resolution process however, if they decide to do so the landlord is obliged to enter into that process. The dispute will then be referred to an independent adjudicator who will make a decision in relation to the deductions based on the information which has been submitted, within 20 working days. If one of the parties is not happy with the dispute then they can ask for the decision to be reviewed. However, after a review the decision made will be final and binding on both parties.

It is important to note that a sheriff cannot award the landlord the deposit in proceedings for recovery of possession due to unpaid rental but that such proceedings will inform the scheme’s decision under the dispute resolution process.

In the event that the deposit does not cover the full cost of the repairs required to the property, the landlord can raise a court action against the tenant for the recovery of the outstanding sums. In any court proceedings, the landlord will be required to provide clear evidence of the damage or repairs which are required together with supportive evidence to show the costs of the repairs. As we have seen in the recent case of H&H Properties UK Ltd v Marc and Linzi Douris the court is unlikely to award the landlord the full cost of the repair works, particularly if a tenancy has been ongoing for a number of years and in the absence of clear obligations under the lease. In that case the pursuer, the landlord, sought payment of an additional £2,500.35 by way of costs of redecoration, replacement and repairs to the property at the end of the lease due as a result of the defenders, the tenant’s, alleged breaches of their lease. The pursuer had recovered the whole of the defenders’ deposit of £725. The defenders, while accepting that some additional payment was due to the pursuers in respect of repairs, was that the particular costs were unjustified or excessive. The Sheriff in the case highlighted that even if the defenders were in breach of the terms of the lease agreement, this may not give rise to an actual loss to the pursuer for which a reasonable sum is claimed. The Sheriff noted that particular attention must be given to the specific terms of the tenancy agreement when calculating the costs of the repairs and that the repairs must be justified in terms of a breach by the tenant of the terms of the lease. For example, the landlord cannot give focus to an expectation that the property would be in a high state of repair when the lease did not provide for such a strict interpretation. The Sheriff suggested that should the landlord expect the subjects of the lease to be in a certain standard at the end of the tenancy, this should be specifically referred to in the lease. The court awarded the total of £1,242 against the original sum of £2,500.35 sought in respect of repairs. This took into account a deduction of around 10% per year in respect of “fair wear and tear” together with the Sheriff’s assessment as to what works the tenant were responsible for, taking into account the specific terms of the lease agreement.

We are experienced in acting on behalf of both landlords and tenants. Should you have any questions in relation to tenancy deposit schemes, rent arrears or evictions, please don’t hesitate to get in touch by calling 0333 222 1855 or contact us online.

Alan Cameron

Alan Cameron

Dispute Resolution Team

“My motto is: ‘First they ignore you, then they ridicule you, then they fight you, and then you win.’”

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