Tenancy deposit protection revisited (part 1)

By Malcolm Combe, posted on 25 February 2021. This is the first of two blog posts by him on residential tenancy matters. The second will be published next week.

Earlier this month, The Herald published a story headlined “Glasgow landlord who ‘didn't see point’ of deposits law ordered to pay thousands to students”.

The Herald report tells the tale of two tenants who successfully claimed a sum of money from their former landlord as a result of his failure to comply with the law relating to tenancy deposits that has operated in Scotland for approximately ten years.

Details of this legal regime can be found on the Scottish Government’s website. In short, in most circumstances residential landlords must lodge any deposit requested in connection with a tenancy with one of three recognised deposit protection schemes.

Naturally, there is nothing wrong with a landlord requesting a tenancy deposit, to offer a degree of protection against tenant conduct or indeed omission. That being the case, Scots law requires any such deposit to be held by a suitable custodian, lest there be any attempt by a landlord to take advantage of the position of being in funds should a dispute arise or, worse, simply keep the money without justification, not to mention offering a tenant some protection against a landlord’s insolvency. (Separately but relatedly, there have been rules about the maximum deposit that can be sought from a tenant for many years, which prevents a landlord from demanding an unrealistic sum of money.)

Regulation 3 of the Tenancy Deposit Schemes (Scotland) Regulations 2011 requires that landlords do this within 30 working days of the beginning of the tenancy. Failure to comply with the 2011 Regulations can result in the landlord being order to pay a financial penalty to any tenant who was left exposed to risk as a result of the deposit not being lodged in a suitable scheme.

The case

Returning to the matter at hand, the legal decision reported on by The Herald can be found at the website of the First-tier Tribunal for Scotland (Housing and Property Chamber) (reference FTS/HPC/PR/20/1945). For information, this forum (“the FtT”) has jurisdiction for most private residential tenancy matters in Scotland, a role it took over from the Sheriff Court four years ago.

The press report mentions two students, although this apparently overlooks a third student who was also involved in this action before the FtT. Be that as it may, the co-tenants all brought an action against their former landlord for the flat they shared at Argyle Street in Glasgow, having entered into a private residential tenancy in June 2019, with a related deposit of £1,395 paid in advance. This deposit was never lodged in a relevant deposit protection scheme, despite the tenants’ enquiries about this in June and August 2019.

Although this case was not actually about the Covid-19 pandemic and the law reform that followed on from it to regulate evictions (as previously covered in the Strathclyde Law Blog), the pandemic does play a part in the narrative; the co-tenants noted in evidence that they had lost their employment in March 2020 as a result of the coronavirus pandemic. This triggered some toing and froing of correspondence between one co-tenant and the landlord, which began with a text message indicating that the tenants planned to leave (and indeed some or all of the tenants moved back in with their respective families towards the beginning of lockdown). No doubt desirous of maintaining some kind of income, the landlord offered to divide the rent by two, and this was followed by a vague agreement for mitigated rent to apply for an uncertain period. A more concrete notice to leave was eventually provided by the tenants to the landlord on 12 June 2020, with 11 July 2020 being named as the date for departure.

From the evidence reported by the FtT it is apparent that this was not the smoothest relationship between the landlord and the tenants, and it may be that the pandemic brought something that was already simmering to the boil. Much of the evidence around the conduct of the parties and various collateral issues was disputed, but in a way this did not really matter in the context of this targeted deposit dispute or in the context of the tenants’ ability to end the tenancy.

Taking that latter point first, tenants do not need to have any particular reason to bring a private residential tenancy to an end, and with appropriate communication they can do so with 28 days’ notice (all in terms of the Private Housing (Tenancies) (Scotland) Act 2016).

The nub of this case was whether the landlord had complied with the aforementioned rules in the Tenancy Deposit Schemes (Scotland) Regulations 2011. As noted, the tenants had chased for information about whether the landlord had done this before relations soured between them, and long before the word “coronavirus” entered daily parlance. He did not do so. This omission left him vulnerable to an application from the tenants he had deprived of the protections that should have applied.

How much?

Where a timeous application is made under the 2011 Regulations (either during the tenancy or within three months of the end of the tenancy) and a breach is established, this means that the FtT must make a ruling. The FtT does however have discretion when it comes to the financial penalty: regulation 10 provides the FtT “must order the landlord to pay the tenant an amount not exceeding three times the amount of the tenancy deposit”.

This is not an automatic triplication; the FtT must weigh up the situation before choosing what to multiply the deposit by, up to a maximum of three. Here the sum of £2,790 was fixed, being a sum equal to twice rather than thrice the tenancy deposit (The Herald has the figure correct in the caption of the photo, but incorrect in the body of the story).

Why not triple, especially given what the FtT itself noted was “apparent disregard for his obligations” such that the landlord (in his own words) “did not see the point” in lodging the deposit with an approved scheme, over and above his experience as a landlord? All of that could have been and rightly was regarded as aggravating: tellingly for the landlord, notwithstanding any disputed evidence around other issues the tribunal found that he “repeatedly made untrue assertions regarding his history of compliance with the 2011 Regulations until he ultimately accepted that he had previously breached Regulation 3 in respect of other tenants.” The landlord was found to be a professional landlord with suitable experience and a current portfolio of fifteen properties, so there was no question of him being ambushed by these well-established rules, and even if he had been the tenants in this property had been chasing him for information about his compliance since the summer of 2019.

In mitigation, the landlord had accepted his breach at the earliest possible opportunity in the tribunal process. Moreover, and fortunately for the landlord, another piece of evidence that the FtT did accept was that the landlord had instructed someone to assist him with the letting of his properties, including in relation to assistance with deposit management since the summer of 2020. Accordingly, his steps to ensure future compliance with the 2011 Regulations demonstrated that he had learned something. The tribunal also noted in the circumstances that there was little need for the sanction to act as a deterrent.

Was this figure about right? “Probably”, is probably the extent of the erudite analysis that I can offer. By this I mean any appeal seeking a higher award would probably not be worth it (see for example Rollett & Mackie [2019] UT 45, where Sheriff Nigel Ross rejected an appeal award against an award of two times the deposit when the tenant wanted more). A trawl of the cases listed under Rule 103 in “Other Private Tenancy Applications” might reveal some cases that seem stricter, and others that seem more lenient. Definite patterns are difficult to reveal. In this case though, the FtT correctly followed the approach set out by Sheriff Welsh in the case of Jenson v Fappiano 2015 EDIN 6 – that being the case that has now established itself as a leading reference point for the assessment exercise, despite some alternative approaches that have been dabbled with in the past (as analysed by Matthew Nicol in an online article for the Journal of the Law Society of Scotland) – and that is essentially that.


Was this case newsworthy? The report itself appears noteworthy in terms of the students representing themselves, albeit the FtT’s decision actually notes they were assisted by a Mr McLean. (Curiously, according to the landlord Mr McLean attended the property in Argyle St at one stage, as a mock delivery man, in what the landlord sought to portray as harassment from the tenants towards him. No further detail is provided of this intriguing incident.) That detail aside, at a more fundamental level this is a clear instance of the scheme working and it doing so mechanically. This makes the case a useful reminder of the scheme, and one that the Chief Executive of the Scottish Association of Landlords seemed to welcome, judging by his words the end of the report in the Herald.

To draw this first of two blog posts to a close, whilst there may have been other aspects of this dispute beyond the unprotected tenancy deposit, that is completely irrelevant to the tenancy deposit regime. Landlords must abide by it, and where they do not do so tenants should not be shy about holding landlords to account as in most cases quite a handy financial windfall will come their way. Another landlord and tenant deposit dispute – which also features a letting agent in an important (and expensive) supporting role – will be considered in a second blog post.

UPDATE March 2021: the second part of this blog post is now available on the Strathclyde Law Blog.