We have blogged on tenancy deposits before and, in particular, claims against landlords for failing to lodge deposits with an approved tenancy deposit scheme continue to form a significant proportion of the business of the First-tier Tribunal: Housing and Property Chamber. After eviction and civil cases, tenancy deposit claims are the third largest category of claims. Whilst such claims are often straightforward in that the landlord either has or has not lodged a tenancy deposit and issued the prescribed information, the Upper Tribunal recently looked at the issue around a landlord’s duties where a deposit is transferred from one scheme to another and questions around a failure to update prescribed information. The decision can be found here.
What was the background?
Put very simply, whilst a tenancy deposit was received in relation to a tenancy and the landlords through their agents lodged it with an approved tenancy deposit scheme and issued the prescribed information within 30 working days of the beginning of that tenancy, at a later stage the landlords sought to transfer the deposit from one approved scheme to another (permissible in terms of Regulation 23 of the Tenancy Deposit Schemes (Scotland) Regulations 2011 (as amended)). That occurred and although the tenants were advised of the transfer by the approved tenancy deposit scheme, the landlords did not advise the tenants of the transfer.
What did the tenants claim?
The tenants argued that there was a duty under the Regulations on the landlords to notify of the transfer to another tenancy deposit scheme and that a failure to do so within 30 working days of payment into that new tenancy deposit scheme was a breach of the landlords obligations under Regulation 3 of the Regulations and they were therefore entitled to a penalty against the landlords under Regulation 10 of up to 3 times the value of the deposit.
What did the Upper Tribunal decide?
The Upper Tribunal decided that, whilst landlords have a duty under Regulation 43 to update the prescribed information under Regulation 42 that is given to tenants in the event it becomes inaccurate (which in this case was not complied with), the ability to seek a penalty against a landlord under Regulation 10 applies only to failures to comply with the original duty under Regulation 3 to lodge the deposit with an approved scheme and issue the appropriate prescribed information under Regulation 42 and there is “no power provided in the regulations for payment of a fine or sanction arising from this breach of duty.” .
What should landlords do if they are transferring deposits between schemes?
Whilst the decision of the Upper Tribunal means that there is no sanction against landlords for getting it wrong, if a landlord transfers a tenancy deposit from one scheme to another, they should update the prescribed information that was given to tenants at the outset to provide the name and contact details of the new tenancy deposit scheme and this should be done within 30 working days of the date the deposit was paid into the new scheme.
If you require any further information or advice, please contact us or watch our blogs for further updates.
