1st March 2021

Tenancy Deposit Scheme: When is a deposit paid but not protected?

The Tenancy Deposit (Scotland) Regulations 2011 and Tenancy Deposit Schemes (Scotland) Amendment Regulations 2019 put certain obligations on a Landlord to ensure that any deposit paid by a Tenant is protected. Amongst other things, the Landlord must pay any deposit received to an ‘Approved Scheme’ within 30 days and provide the Tenant with certain information. If the Landlord fails to do so, the Tenant can raise an action at the First Tier Tribunal (Housing and Property) Chamber for up to three times the deposit amount.

Blackadders LLP were recently instructed in a matter to consider what the regulations actually meant by the obligation “to pay”. The full judgement can be read at https://tinyurl.com/ycm77fh8.

Facts

The Applicant entered into a tenancy agreement with the Landlord which was facilitated through a Letting Agent. The Applicant paid a deposit to the Letting Agent. The Letting Agent then followed normal practice, created an account and transferred the deposit to an Approved Scheme detailing the ID number on the bank transfer. The final steps were not then taken to allocate the deposit to the Applicant, meaning that her deposit was unprotected for a period of time. Once a deposit is allocated, an email should usually be generated confirming that the deposit was paid. No party received this email.

The Landlord’s agent sought to argue that as the money had been transferred, Regulation 3 to pay funds was satisfied and they were not in breach. They further argued that failure to allocate the deposit was the fault of the Approved Scheme provider and they had done all that they usually did to allocate the payment. Further, the Landlord’s agent noted that they had never had any difficulty before and presumed the allocation was correctly completed.

On behalf of the Applicant we argued that in order for the Regulations to be complied with, the deposit required to be protected. In order for protection to occur, allocation was needed with the confirmation email then being issued. We argued that the Landlord’s agents, being seasoned agents, should have had processes in place to ensure that all necessary steps were undertaken for allocation.

Decision

The Tribunal found in favour of the Applicant, as although payment of the funds had been made, the Landlord’s agent did not then follow up to ensure that funds had been received and allocated. During this period, the Tenant’s deposit funds were not secured and could potentially have been returned to representatives or allocated to another Tenant, defeating the purpose of the Regulations. The Tribunal noted that the breach was not wilful, however occurred due a defect in the systems. As such, paying a deposit is not enough to comply with the Regulations and for protection to occur. Allocation must take place.

What does this mean if I am a Landlord?

Even if you contract a Letting Agent to deal with the administration of your property, it is clear that the Landlord still has obligations to comply with the Regulations. You should contact your Letting Agent to ensure that the necessary steps are taken for compliance with the Regulations.

If you do not have a Letting Agent, you should ensure that you have correct due process for the deposits to be paid and allocated timeously. You should maintain records of the same and ensure you receive a confirmation email.

What should I do if I am a Tenant?

If you have not received information on the date the deposit was paid to the scheme, your deposit ID and terms in which the deposit can be secured within 30 days of commencement of the tenancy, there is a risk that your deposit may not be protected. You should contact your Landlord to request the information. You can also contact the Approved Schemes in Scotland to see if your deposit is held. Should no response be received or your deposit was not adequately protected, you can consider raising a Tribunal action. Any application should be made within three months of the end of the Tenancy.

If you need any advice about raising or defending proceedings at the First Tier Tribunal (Housing and Property Chamber) please get in touch with Blackadders’ Dispute Resolution Team working in Aberdeen, Dundee, Edinburgh, Glasgow, Perth and across Scotland.

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