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Deposits and Tenancy Deposit Schemes

Deposits and Tenancy Deposit Schemes, Fair Wear and Tear, Tenant Deposits and Dispute Resolution.

Almost without exception its normal practise in the lettings market for deposits to be taken by a landlord or letting agent as part of the tenancy agreement. This protects landlords against any problems that occur during the tenancy, such as a failure to pay rent, or if the tenants cause damage to the property. 

In Scotland landlords are obliged to place any deposit they receive in to a Government-authorised Tenancy Deposit Scheme.

The three approved scheme providers are SafeDeposits Scotland, MyDeposits Scotland and the Letting Protection Service Scotland. 

At the start of a new tenancy agreement, the tenant pays their deposit to their landlord or agent as usual. The landlord or agent must then ensure it’s protected by ensuring it’s enrolled in one of the government-approved schemes and the tenant provided with the mandated notification within 30 (working) days of the start of the tenancy.

Under these schemes, the money is held by the scheme provider, rather than the landlord, until it’s time for it to be repaid at the end of the tenancy. 

At the end of the tenancy, if an agreement is made about how the deposit should be paid, the scheme will return the deposit as agreed. If there’s a dispute that the parties cant resolve themselves then the scheme holds the deposit until the dispute resolution service process decides what should happen to it. Any interest is retained by the scheme to pay for its services.

If a landlord or agent fail to put the deposit in one of the schemes then they may be liable for a fine of up to three times the original deposit plus the deposit.

Often the biggest issue following a check out of a tenant from a property is often determining The Fair in ‘FAIR WEAR AND TEAR’ There is a very fine line between what can be happily termed ‘fair wear and tear’ and what constitutes ‘damage’. This link is a useful guide (not Scotland specific but still useful) http://www.tds.gb.com/resources/files/A-guide-to-deposits-disputes-and-damages.pdf.

Any of the approved scheme web sites above will provide information about this and possible examples of “disputes”. However take a look at the Dispute Resolution Service web site which details countless case studies relating to disputes between landlords and tenants on this very subject matter and it is quite evident that there is plenty of scope for landlords and tenants to be treated far from fairly if good practice is not followed.

A consistent approach to Inventories, periodic inspections and check-outs, must be an absolute priority. Correctly undertaken, these will deliver the basis for a successful and uncontested tenancy by providing all the necessary supporting documentation to avoid disputes between the landlord and tenant in relation to the condition of the property and its contents.

An independent inventory management company is far better equipped to provide an unbiased and objective assessment of a property and this applies throughout the period of the tenancy. 

Whoever is responsible for determining fair wear and tear, it is essential that the landlord is appreciative of the need to make allowances for depreciation – whilst accepting that he / she cannot use the tenancy as a means of ‘betterment’ i.e. seeking out replacement of damaged / missing items with new ones (unless the items were brand new at the start of the tenancy).

Allowances must be made for the duration of the tenancy, the age of the item and the type of tenant e.g. family, professional couple, single occupancy, students, all of these things will have a huge bearing on the anticipated overall wear and tear on items in a property.

For example, a family of four is likely to use a washing machine more often than a professional couple and therefore this needs to be considered and reflected in the decision. Likewise a medium quality carpet with a professional couple living at a property would last for typically 5 years, whereas a family occupancy would reduce the lifespan to typically 3 years.

Care of the external living area i.e. the garden represents a classic example of this and is so often the cause of heated debate between landlord and tenant. In the majority of cases the garden will be treated as an ‘outdoor room’ and as such, should be returned to the landlord in the same condition / state of maintenance as when the tenancy agreement / inventory is first signed. This is an accepted requirement regardless as to whether or not the tenants have chosen to take advantage of the garden facilities. 

The list of possible areas of disagreement are endless, the key is documentation, the inventory, routine inspections and the check out. Photographs, copies of emails etc.

There is always going to be an element of “I think its dirty and you think its clean” so evidence is vital throughout the tenancy. Making sure that the tenants know what is and isn’t acceptable within the property e.g. decorating, putting shelves up etc and what is expected when they leave will help avoid so many problems.

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