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Most landlords nowadays will take a ‘damage deposit’ from tenants to hold for the duration of the tenancy. Any deposits taken with an AST since 6th April 2007 have to be protected in one of three government-authorised deposit protection schemes.

Most landlords nowadays will take a ‘damage deposit’ from tenants to hold for the duration of the tenancy. Any deposits taken with an AST since 6th April 2007 have to be protected in one of three government-authorised deposit protection schemes. Deposits taken before that date will only need registering if the landlord wishes to serve a valid section 21 notice.

This subject will explain the factors to take into account when deciding how much to ask for as a deposit. It will also explain how tenancy deposit protection works, at both the start and end of the tenancy. It is not intended to cover the specific rules of each scheme. Once you have selected a scheme, the specific rules to that scheme should be obtained from the provider.

An alternative option to taking a deposit is to ask for a guarantee from a third party (such as a parent or the local authority) that they will cover any costs arising to the landlord from rent arrears or damage to the property. This can be particularly useful where the tenant is on a low income and may have difficulty putting together an amount of money for a deposit.

Finally, if a tenant is very interested in taking a property a landlord may want to ask for a holding, or reservation fee to secure the property for that tenant until any reference checks are complete and a tenancy agreement is signed. A holding fee does not have to be protected in a tenancy deposit scheme unless it is subsequently used as a tenancy deposit. This subject will introduce you to good practice in taking holding fees.

** See Additional Resources for a Guide on what may be deemed fair Wear and Tear and a NEW Guide, written by all three Schemes, on Alternative Dispute Resolution

** Please Note: Changes to these rules and procedures came in on 6th April 2012. These pages have been updated, and you can also see the section at the end of this subject outlining all the changes.

Also, the Deregulation Act 2015 contains important changes to deposit protection legislation and now clarifies the issues created by two recent court cases of Superstrike vs Rodrigues and Charolambous vs Ng.

A summary of the implications of the Deregulation Act 2015, and what you need to do in order to comply is contained in the pages below.

Landlords in Scotland are waiting to hear about what types of tenancy deposit schemes will be on offer so that they can comply with new rules making tenancy deposits mandatory.

The Tenancy Deposit Schemes (Scotland) Regulations 2011 came into force on 7^th March 2011, following approval by the Scottish Parliament. Scottish ministers are considering proposals for the operation of tenancy deposit schemes which will be assessed against the conditions set out in the regulations.

Landlords in Scotland are waiting to hear about what types of tenancy deposit schemes will be on offer so that they can comply with new rules making tenancy deposits mandatory.

The Tenancy Deposit Schemes (Scotland) Regulations 2011 came into force on 7^th March 2011, following approval by the Scottish Parliament. Scottish ministers are considering proposals for the operation of tenancy deposit schemes which will be assessed against the conditions set out in the regulations.

Every landlord who receives a deposit and who is required to register in the local authority register of landlords in line with the Antisocial Behaviour (Scotland) Act 2004 (landlord registration) must also comply with the Tenancy Deposit Schemes (Scotland) Regulations 2011.

This includes landlords of assured and short assured tenancies, university accommodation, as well as various other types of occupancy arrangement.

Timing

The scheme will have an operational start date of Monday 2 July 2012.

The legal duties on landlords who receive a deposit in connection with a relevant tenancy will also be triggered from 2 July. The legal duties on landlords are:

· to pay deposits to an approved tenancy deposit scheme

· to provide the tenant with key information about the tenancy and deposit

To allow landlords and letting agents time to adjust to the new way of dealing with tenancy deposits the Tenancy Deposit Schemes (Scotland) Regulations 2011 set out the transitional arrangements for complying with the legislation.

Key dates for landlords and letting agents

The dates by which landlords must pay deposits to an approved scheme and provide information to the tenant vary, depending on when the deposit was received:

1. Deposit received prior to 7 March 2011:

Where tenancy renewed on or after 2 October 2012 and before 2 April 2013 (Regulation 47(a))

Within 30 working days of renewal

In any other case (Regulation 47(b))

By 15 May 2013

2. Deposit received on or after 7 March 2011 and before 2 July 2012 (Regulation 48)

By 13 November 2012

3. Deposit received on or after 2 July 2012 and before 2 October 2012 (Regulation 4)

By 13 November 2012

4. Deposit received on or after 2 October 2012 (Regulation 3)

Within 30 working days of the beginning of the tenancy

These pages will be updated accordingly.

First of all make sure the tenancy deposit is covered by the tenancy agreement. In the tenancy agreement the landlord should:

• clearly state terms of liability

• include how interest will be dealt with

• state how any dispute will be solved

• draw up a detailed inventory that all parties agree to.

The terms of liability should:

• outline the amount of deposit held (legally this cannot be more than two months’ rent)

• make clear that the deposit will be held in an approved scheme

• state what the deposit covers and what deductions can be made for

• emphasise what the tenant is responsible for

• make terms fair and ‘reasonable’

• refer to the inventory of the contents and conditions

• provide for interest payment if applicable

The tenancy agreement should also have a clause stating how any interest on the deposit will be dealt with. The tenancy deposit will be held by an approved scheme.  Therefore, a clause stating that no interest will be payable in connection with the deposit should suffice. 

It is important to state right from the outset that any dispute will be dealt with in accordance with the applicable Tenancy Deposit Scheme provisions.

An inventory should be a clear statement of what fixtures, fittings and furnishings are in the property at the beginning of the tenancy and their condition. A well written inventory with accurate descriptions can be proactive in avoiding disputes at the end of the tenancy.

An inventory should:

• clearly state the condition of decoration, carpets and fixtures/fittings

• itemise the furniture and condition/location

• give utility readings, meters and providers

• make reference to cleanliness – and ask the tenant to leave it in the same state

• give photographic evidence (easily and cheaply available with a digital camera!)

• get all parties to sign inventory

Sometimes at the end of the tenancy, disputes arise over the return of the deposit. The parties should try to reach an agreement on how the deposit should be repaid. If parties are able to reach agreement, the process of releasing the deposit from the applicable approved scheme should be straightforward.  
The Landlord/Agent or Tenant can start the release process.
Each scheme will have its own process to be followed in terms of release.  Generally, one party will submit a proposal to the Scheme stating how the deposit should be allocated. 
If parties are in dispute, the matter can proceed to the Alternative Dispute Resolution process provided by the Scheme if the Tenant agrees. The Landlord or Agent will be asked to provide evidence to support the Landlord’s entitlement to the sums sought. The adjudicator will reach a decision. It will be for the Landlord to satisfy the Adjudicator of the Landlord’s claim to the deposit. 
If either party is not satisfied with the outcome of the adjudication they can request a review of the adjudicator’s decision. The request for a review must be made within 10 working days of receipt of the decision. Otherwise, the decision will be final. 

An alternative to deposits is to use a guarantor; this is where a third party agrees to pay the tenant’s liabilities arising from the tenancy. Guarantors stand surety. 
This means that they guarantee rent payments and other tenancy obligations. A guarantor pays the landlord the rent if the tenant defaults, and pays the landlord’s losses, expenses or damages where the tenant fails to carry out his obligations under the lease.
If you decide to ask for or accept a guarantor rather than a deposit you should make sure that the guarantor understands the responsibility they are taking on. You should provide the Guarantor with the tenancy agreement and a Guarantor Agreement. 
The contract should be signed by both landlord and guarantor at least seven days in advance.
The guarantee should remain in place for the duration of the tenancy. 

It is increasingly common, once a prospective tenant has expressed a genuine interest to entering into a tenancy agreement, to take a Holding Deposit in order that the property is reserved and taken off the market. Unfortunately there are too many people who say they will definitely take a property, but for whatever reason do not proceed, make no further contact and don’t respond to any messages left.

It is increasingly common, once a prospective tenant has expressed a genuine interest to entering into a tenancy agreement, to take a Holding Deposit in order that the property is reserved and taken off the market. Unfortunately there are too many people who say they will definitely take a property, but for whatever reason do not proceed, make no further contact and don’t respond to any messages left. Therefore the idea of a Holding Deposit is to eliminate this behaviour.

If a Holding Deposit is taken then a receipt should be issued and it should be made clear that the Holding Deposit is non-refundable if the prospective tenant simply changes their mind. On the assumption that the tenancy does go ahead then whatever sum has been paid as the Holding Deposit is then put towards the Security Deposit.