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  4. Tenancy deposit system serving its purpose, users believe

Tenancy deposit system serving its purpose, users believe

24th December 2018 | Housing

The deposit protection scheme for private sector residential tenants in Scotland is serving its purpose, the majority of landlords and tenants believe.

Newly published research into attitudes towards the system, introduced in 2012 to counter the issue of landlords failing to return deposits at the end of a tenancy, finds a broad consensus that deposits are properly protected under the scheme. One in five tenants reported that they had had a tenancy in the last five years in which the deposit had been unprotected, but in relation to current tenancies more than 90% of tenants affirmed that their deposit was protected, with most of the rest being unsure.

Under the current law, landlords must lodge deposits received with one of three authorised schemes who will hold and invest the money until the end of the tenancy. Landlords are liable to pay their tenants up to three times the value of the deposit if they fail to do so.

The research finds that the majority of tenants knew enough about the purpose of the scheme and the way it works. Most tenants felt confident that their deposit was safe, and of those who had had a tenancy that ended in the last three years, the majority had received their deposit back on time and/or in full. Delays caused by the landlord and by negotiations were the most common reasons for not receiving a deposit back on time. 

Almost six out of 10 tenants who did not receive back their deposit in full and/or on time did not dispute it with the scheme, mainly because they already had enough information or they did not think it would make any difference.

From the landlords’ perspective, the vast majority were positive about the scheme regulations and especially that they were good for their tenants, while more than half agreed that the regulations were also good for landlords. However, while just over half of landlords would not object to the money from unclaimed deposits being invested in improving the private rented sector, a substantial minority thought landlords should be given the money, with smaller proportions suggesting it should be given to charity, to homelessness or to the social/affordable housing sector.

Unclaimed deposits appear to come mainly from students, especially overseas students. The Scottish Government is currently exploring how best to deal with them.

Landlords found the scheme easy to operate. They were more likely than tenants to have used the dispute service of the scheme, but the majority had not used it, mainly because they did not want to spend time/effort or because they had already agreed with the tenant.

However awareness among landlords of the recent private renting sector changes was generally low: four out of 10 knew a lot about the new private residential tenancy, but far fewer knew a lot about letting agent registration, letting agent code of practices or the First-tier Tribunal for Scotland.

As for the authorised bodies, there was a broad consensus that the regulations provide a robust regulatory framework for protection of’ deposits, and there was no objection in principle to unclaimed deposits being reinvested into the private rented sector, but there was an issue around the impact of low interest rates. Five year rates are now lower than those achieved in 2013-14, which could have an effect on account surpluses in the future if the rates do not increase and could have a knock-on impact for their ability to innovate.

Click here to access the research findings.

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