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19th July 2012

If you are the landlord of residential property taking deposits from tenants then life has just become a whole lot harder...................

The introduction of the Landlord Deposit Regulations has left many landlords and tenants bewildered. Most tenants don't know that the Regulations exist. Landlords don't know how to comply. So what do the Regulations mean?

All registered landlords must comply with the Regulations. If you take a deposit, this must be paid into one of the government approved deposit holding schemes; The Letting Protection Service Scotland, SafeDeposits Scotland and MylDeposits Scotland. Only time will tell which scheme, if any, proves more popular. More schemes may arise.

At the end of the tenancy, either the landlord or tenant can apply to have the deposit returned. In the event of a dispute, each scheme offers a free dispute resolution service. The dispute must be resolved within a specified time period and the deposit will not be paid out until the dispute has been resolved. Detailed inventories of fittings and fixtures, and ideally a detailed record of the condition of the property and clear repairing obligations will now be even more important than ever in resolving deposit disputes.

Landlords must provide the tenant with certain information, including but is not limited to; their registration status, confirmation that the deposit has been received, date it was paid into the scheme, and contact details for the scheme. Failure to provide this information, or to pay the deposit into an approved scheme, results in hefty penalties for the landlord. Sheriffs MUST order landlords to pay up to 3 times the amount of the deposit to the tenant if they break the rules.

Schemes are currently free for landlords to join but all of this does come at a cost. Landlords will not receive interest on deposits as any interest gained will be used to cover the running costs of the schemes. The schemes are designed to pay deposits out only at the end of the tenancy. Therefore, landlords may have to put their hands in their own pockets to repair any damage which arises during the tenancy.

In our view, the Regulations are weighted in favour of the tenant with little, if any, benefit for the landlord. Being a landlord will become more costly, time consuming and administratively more challenging. We can help by reviewing the style of lease you use to give you a better position when any dispute about loss or damage occurs.

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