This article is concerned with the way in which Scottish courts are interpreting the (fairly new, at time of writing) tenancy deposit schemes. These are given effect by Part 4 of the Housing (Scotland) Act 2006, and the Tenancy Deposit Schemes (Scotland) Regulations 2011 (the “Regulations”).
The type of landlord caught by the Regulations is a person other than a local authority, registered social landlord, or Scottish Homes. The type of tenant similarly caught are those who are not a member of the landlord’s family.
In reality, this means that the Regulations will cover any ‘arms length’ private letting of residential property.
The cornerstone of the Regulations (found in regulation 3) is that landlords now require, within a short timescale, to place any tenancy deposit that they receive from the tenant into a tenancy deposit scheme. If a tenancy began before the Regulations came into force, the landlord still requires to lodge the deposit (albeit with a longer time allowed).
Interestingly, although perhaps unlikely to occur in a residential lease, the definition of “tenant” in the Regulations is sufficient to include former tenants who have paid a deposit, and then assigned or otherwise transferred their interest as tenant under the lease of the property in question.
The second obligation on the landlord is to provide the tenant with information set out in the Regulations.
If the tenancy deposit is paid into a relevant deposit scheme, and a dispute arises, it can then be adjudicated on by the deposit scheme. This saves parties time, and frees up Courts for more pressing matters. However, in order to compel the lodging of deposits, the Regulations provide for punitive sanctions to be ordered against a landlord.
If an action is raised by a tenant, and a Sheriff is satisfied that a landlord did not comply with the duty to pay over the deposit to a relevant deposit scheme, or failed to provide information, they must order the landlord to pay the tenant compensation. Additionally, the Sheriff may also order the landlord to pay the deposit into a relevant deposit scheme, or provide the tenant with the information set out in the Regulations.
The Sheriff does have some discretion when deciding upon the sum to be awarded to the tenant, up to the cap of three times the deposit.
The time limit for an application to Court by the tenant under regulation 3 of the Regulations is three months after the tenancy ends, and it must be made in a certain manner. However, a tenant may still raise an action outwith this timescale for return of a deposit that is not in a relevant deposit scheme. It has been held by Sheriff Davidson in Omale v Barcenas SA55/14 that the landlord’s failure to lodge the deposit in a relevant deposit scheme meant that, as a matter of public policy, the landlord could not retain the deposit (other than an amount the tenant accepted was owing for rent). This case is also authority that a failure to lodge a deposit will be viewed by the Court as unreasonable conduct, when assessing expenses.
Even if a case is brought properly in terms of the Regulations, there is no guarantee that a tenant will walk away with three times their deposit. For instance, in Jenson v Fappiano 2015SCEDIN6, Sheriff Welsh QC made an award of one-third of the deposit. The Sheriff highlighted that judicial discretion is not unfettered, and that the aim was to impose a “fair, proportionate and just sanction in the circumstances of the case”. The award is not designed to reflect any loss suffered by the tenant.
Matters that appeared to go to mitigation in the level of award were the landlord’s amateur nature, the fact he appeared “chastened” by the Court process, and that the deposit was belatedly paid into the scheme. The Sheriff noted, as an aside, that a “large professional commercial letting undertaking” which repeatedly and flagrantly failed to comply with the Regulations would warrant an award at the top end of the scale (ie three times the deposit). It may also be observed that the tenant in that case appeared to be trying to use the landlord’s weakness to his advantage, which may have had some bearing on the Sheriff’s decision.
There have been several other recent cases (including one which was appealed to the Inner House of the Court of Session) which are beginning to put flesh onto the bones of the Regulations, in terms of the level of award that may be made.
One can see how easy it is becoming, as an “amateur” landlord, to fall foul of various Regulations and Acts and find oneself before a Sheriff. Many landlords, for instance, still do not realise that they require to register as a private landlord.
Similarly, tenants are becoming more aware of the new leverage that they may have over unscrupulous landlords.
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Should you encounter difficulties with your residential lease, whether you are landlord or tenant, our litigation team can ensure that you receive the best possible outcome. This article is for general information only. Nothing in this article should be taken as legal advice. If you have any queries on the content of this article please contact us.
