In England and Wales every landlord who has taken a deposit in connection with a new or renewed Assured Shorthold Tenancy (AST) since 6 April 2007 has been required by law to protect that deposit using a Government backed tenancy deposit protection (TDP) scheme.
In Scotland on the other hand no such requirement currently exists.
As is the case with a great deal of regulation, TDP was not universally welcomed by the landlord community in England and Wales. The overwhelming view was that as the majority of landlords would only ever withhold money in relation to legitimate damages or loss the problem was a relatively minor one.
At the time the NLA recognised that a small number of landlords did on occasion fail to return some or all of their tenants’ deposit, leading to dispute. But considered a mandatory TDP scheme an overreaction to a small problem. Frankly, we thought that there were more appropriate ways to improve the dispute resolution process.
However, during the passage of the Housing Act 2004, it became very clear that the Government could not be dissuaded from introducing TDP – leaving the NLA with a difficult choice to make. Should we continue to protest the establishment of TDP, knowing that we would not succeed in blocking its introduction? Or should we indulge in some lateral thinking and try to find a way to limit the potential damage to landlords.
The path we chose invited quite a lot of criticism, but was the only option which allowed landlords a degree of flexibility.
Rather than sit back and allow the original plans for a custodial only scheme to proceed. We decided to focus our efforts on ensuring that landlords would have a choice between paying all deposits over to a custodial scheme or using an insurance backed product to retain the deposit for the length of the tenancy.
We believed so strongly that this was the only fair way to proceed that we decided to sponsor a proposal, which later became one of the three Government approved schemes (my|deposits) and the only insurance based scheme designed specifically for landlords.
Which is why we are so concerned by the Scottish Government’s recent announcement that it intends to proceed with TDP.
No potential provider of TDP has as yet gone public, and some of the details are still sketchy, but the draft legislation outlines the following:
• Provisions are only made for a custodial scheme. Removing the option available in England and Wales for landlords to hold on to deposits for the duration of the tenancy having used an insurance backed scheme.
• The scheme, or schemes, must be free for landlords and tenants to access.
• Dispute resolution must be provided at no cost to landlord or tenant.
• Landlords will have 30 days to protect a newly received deposit and notify the tenant
It also seems that, unlike South of the Border, landlords will be required to protect existing deposits within nine months of the scheme becoming operational.
Given the Scottish Government’s inability to implement and appropriately enforce private-landlord registration, the NLA is at a loss to understand why they should further extend themselves by embarking on a scheme of the magnitude of TDP.
While the NLA recognises the professionalising impact that TDP has had south of the border in relation to bringing tenancies to a close in an orderly fashion, we believe that politicians should concentrate on sorting out the mess of registration before committing to new regulation.
If the Scottish Government are committed to implementation of TDP in the near future then it would be grossly unfair to provide fewer options to Scottish landlords than are available to their English and Welsh counterparts. As such it is crucial that landlords be able to choose between custodial and insurance backed options. To do otherwise would risk putting Scottish landlords at a further disadvantage.
Beyond simple unfairness, it would introduce a great deal of confusion for Scotland to operate TDP on an entirely different basis to England and Wales. It would also increase administration and operating costs significantly for those landlords active in both market places. Surely no-body benefits from this?