The main obligation of the Tenancy Deposit Schemes (Scotland) Regulations 2011 (2011 Regulations) is fairly simple; landlords must lodge any deposit received with an approved scheme within 30 working days. Yet despite the Regulations being in force for over 15 years, landlords continue to fall foul of the requirements, often leading to litigation in the First-tier (FTT) and Upper Tribunal. In the last reporting period (2024-25), tenancy deposit applications were the third highest category of PRS applications received by the FTT with 270 applications.
In conjoined cases, Chaudhary & Shah v Zhu (PR/22/2854 and 22/2856), tenants raised proceedings against their former landlord seeking an award under the 2011 Regulations and a payment order for return of their £1,500 deposit. The FTT heard evidence over two days, notably with Hearing dates almost a year apart, in April 2024 and 2025. The landlord admitted not lodging the deposit and retaining same at end of tenancy, submitting parties had agreed the deposit would not be registered, which was denied by the tenants.
The FTT found there to be ‘no real mitigation’ for the landlord’s actions and awarded the maximum of £4,500 for breach of the 2011 Regulations. In the civil application, a payment order of £1,500 was also made in favour of the tenants for the ‘sum wrongfully retained’ by the landlord.
The landlord sought to appeal both decisions to the Upper Tribunal. Permission was refused in relation to the TDS case, the penalty of three times the deposit standing. However, the FTT’s decision to order return of the deposit was quashed and the case sent back to the FTT to adjudicate on the landlord’s claims. The UT’s decision clarifies that whilst the FTT can order payment of the deposit into an approved scheme, there is no explicit power to require return of the deposit directly to the tenant. The FTT had erred in law by not determining the merits of the landlord’s claim that deductions from the deposit were due in respect of repairs and cleaning. The UT decision notes because the error concerned only the scope of the FTT powers rather than an error in evaluating evidence or following procedural fairness, there was no legal necessity for the hearing to be remitted to different Tribunal members.
The original applications were lodged in 2022 and yet procedure remains ongoing in 2026. These decisions serve as a reminder that whilst compliance with the 2011 Regulations is straightforward, those who do not comply may find themselves engaged in protracted legal proceedings.
If you would like advice on tenancy deposit obligations or any other aspect of residential letting, expert PRS teams can help.
