Tenancy Deposit GUSRC Response

8/8/2019 Tenancy Deposit GUSRC Response

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John McIntyre Building, University Avenue, Glasgow G12 8QQ

telephone: (0141) 339 8541 fax: (0141) 337 3557 email: [email protected] www.glasgowstudent.netScottish charity No. SC006970

September 3, 2010

Business Support TeamHousing Markets and SupplyScottish Government

Mail Point 19Area 1-J South

Victoria Quay

Edinburgh EH6 6QQ

To Whom It May Concern:

We welcome the opportunity to respond to the consultation on Tenancy

Deposits Scheme (Scotland) Regulations 2010 draft. While we broadly welcome thescheme in principle I have attached our detailed response to the questions posed inthe consultation document. I hope that our feedback is considered in detail and that

the views of the students that we represent are fully considered during the

consultation process. We are very enthusiastic about a tenancy deposit scheme beingintroduced in Scotland as many of our members live in privately rentedaccommodation and these proposals would affect them directly. Indeed at our advice

centre deposit cases accounted for 50% of accommodation casework entries, or 14%of total casework, which indicates that they are relatively complex and time-consuming.

Glasgow University Students Representative Council represents the interests

of over 25,000 students registered at the University of Glasgow to the University and

nation. Council comprises up to 37 elected students who meet throughout the year,and is a fully independent representative organisation being non-affiliates of NUS

(National Union of Students).

Sincerely,

Mr Fraser Sutherland

Vice-President (Student Support)Glasgow University Students

Representative Council


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John McIntyre Building, University Avenue, Glasgow G12 8QQtelephone: (0141) 339 8541 fax: (0141) 337 3557 email: [email protected] www.glasgowstudent.net

Scottish charity No. SC006970

Glasgow University Students Representative Council:Detailed response to the Tenancy Deposits Scheme (Scotland) 2010 consultation.

Question 1: Do you support the proposal that the tenancy types covered bythe tenancy deposit scheme should be aligned with existing landlord registration

legislation?

Yes, one system of governance would give tenants more confidence in the

private rental system. However, we do not agree that resident landlords should beexempt from the tenancy deposit scheme. Our view is that any landlord who takes adeposit from a tenant should be required to protect that deposit in an approved

scheme.

Question 2: Do you agree with the provisions relating to the date that theduty to comply should take effect for tenancies covered by tenancy deposit

regulations?

Yes, a fixed date for the scheme to start would allow both landlords and

tenants time to become aware of the regulations.

Question 3: Do you consider that the sanctions are appropriate and

proportionate to the action or inaction that prompts them?

No, while the proposals are an appropriate and proportionate response to first

time offenders, we believe that more stringent action should be taken against repeat

offenders.

Question 4: Are there additional sanctions that you think would be more

appropriate and effective? If so, how would they be enforced?

For repeat offenders tougher financial penalties should be available. This

could take the form of an escalating scale of sanctions culminating in a temporary orlifetime ban for a landlord who consistently breaks the regulations. This would helpprotect future private accommodation tenants.

Sanctions for non-compliance should be tied into the fit and proper person

test for private landlord registration under Part 8 of the Antisocial Behaviour etc.

(Scotland) Act 2004

Question 5: The regulations currently provide for sanctions to apply to the

person who receives the deposit and fails to comply with tenancy deposit

regulations. Do you agree with this?

We believe that the legislation should stipulate that tenants are free to pursue

either the landlord or letting agent regardless of who actually physically receives

payment of the initial deposit. We have direct experience of both landlords andletting agencies attempting to shift the focus of legal responsibility on to each other.

For example we have dealt with a case previously whereby we raised small claims


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court action against a letting agency who had disclosed only the name of the landlordand no other details. The letting agency tried to have the claim dismissed on the

basis that we should have sued the landlord and we had to obtain a legal opinion tohelp us continue. The legal counsel we sought advised us that this was an ambiguousarea of the law which is why we believe these new regulations are an excellent

opportunity to clarify this point. Furthermore we have also encountered a scenarioinvolving us suing a landlord after his letting agent had gone into administration.

The Sheriff Clerk returned the small claims papers stating that we should be suing

the administrator of the letting agency and that the case would be thrown out if it

went before a Sheriff. We had to send information to the court about the law ofagency in order that the claim could proceed. We believe the requirement to be wellversed in this already complex area of law is preventing access to justice for the very

individuals it is designed to serve.

Question 7: Do you think that the regulations should require a financial

penalty to be imposed in all cases?

Yes, the legislation should provide for a minimum financial penalty with an

unlimited maximum penalty at the sheriffs discretion. This should act as a deterrentto those who would breach the regulations. A minimum financial penalty is also inkeeping with the necessary transparency of the scheme, landlords and tenants alike

would be aware from the outset of the possible financial implications of non-

compliance.

Question 8: Should the court have discretion to decide on the amount of

financial penalty?

Yes, different cases may deserve different levels of penalty. It would be

appropriate to deal with repeat offenders more severely than a first time breach.

Question 9: If your response to Question 8 is yes, do you think there should

be a minimum penalty e.g. at least an amount equal to the deposit?

Yes, an amount three times the deposit would be an appropriate penalty for

those who have failed to meet their obligations as a deposit holder. The timescalesset out in the draft proposals allow adequate time for a secure deposit

scheme/insurance provider to be sought by the deposit keeper. This would becomplemented by a system which provides for the courts to penalise repeat

offenders more severely.

Question 10: The regulations permit a scheme to hold deposits in a

designated interest bearing account. Do you have any views on whether other typesof investment should be allowed?

We would be against any investments beyond those in interest bearing

accounts, with interest generated being used to cover the costs of the scheme.


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Question 11: Do you have any views on the provisions relating to the use ofexcess income accrued on deposits?

Income generated should allow for the administrator to hold the deposits andcover administration costs without charging the tenant or landlord an administration

fee. We would like to see the scheme make a contribution, from any excess income

accrued, to the running of the Private Rented Housing Panel, which we would see asthe natural place to deal with disputes about deposit return. We would also suggest

that consideration be given to donating a proportion of the excess to charitiesworking in the residential sector.

Question 12: Do you have any particular views on the requirement forschemes (particularly insurance schemes) to be available to all landlords?

A common system across the country would allow for transparency to all

tenants and keep the system relatively easy to understand.

Question 13: Do you consider that both custodial and insurance scheme

models afford adequate protection for tenancy deposits and should be permitted inthe regulations?

No, the custodial scheme seems equipped to award a quicker payment ofdisputed monies.

It would be important to make sure that any insurance providers were fully

regulated and protected in case of them ceasing to trade at any point during atenancy and thus unable to fulfil their role in safeguarding the deposit. We havesome concerns about the insurance schemes based on anecdotal evidence from

England whereby landlords and letting agents appear to have been passing the cost

of the insurance scheme on to tenants.

Custodial schemes are free to use at the point of delivery, the model is simple

and transparent. Further, there are no actual cash costs which a landlord can pass onto the tenants. It therefore would be difficult for landlords to use obfuscation to

argue the existence of additional hidden costs when attempting to impose additionalcharges on tenants. The custodial scheme is therefore our preferred option.

Although both types of scheme are available in England, we do not consider

that Scotland requires exactly the same model as England, given the lower numbersinvolved. We are also dubious about the potential interest any third party agencywould have in setting up or becoming involved in a system which accommodated

both the insurance and the custodial schemes. We see the custodial scheme as being

sufficient. Removing the need to choose between schemes has the added attraction

of being simpler for landlords, and should make the system easier for both landlords

and tenants to understand.


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Question 14: The regulations currently only provide for fees to be charged inrespect of insurance schemes. Do you think that fees should also be permitted for

custodial schemes?

No, the accrued interest on the deposits should be used to cover the costs of

the scheme. Fees would add to the cost of renting private accommodation, as these

would most likely be passed on to the tenant. As many of these tenants already findthe costs of renting expensive and sometimes unaffordable, extra fees could add to

this burden.

Question 18: What are your views on whether approved schemes should

repay deposits to lead tenants if so used, or to individual tenants?

Individual tenants must be safeguarded under the new scheme; otherwisethere may be similar problems to those already experienced with deposit returns

between fellow flatmates. Failure to offer individual protection would put manytenants of HMO properties in the unfair position of having to pursue legal action toreceive back deposits from fellow tenants at their own personal cost.

With many HMO tenants being from a less secure financial position they

would also be among the most susceptible to the financial consequences of not

having their deposits returned.

In addition a lead tenant may choose not to pursue legal action thereby

causing all tenants to forfeit their deposits without any right of redress against the

landlord or letting agent. This would undermine the aim of the legislation which hasbeen set out to protect these people who are some of the most disadvantaged insociety.

It should be possible to protect the deposit for a joint tenancy in one account,but the rules should provide that all the tenants must be named on that account.

In our experience we have encountered instances where some landlords havefailed to put all tenants on the tenancy agreement in order to avoid HMO licensing.

This would put further pressure on those landlords to comply with the law.

Question 19: Are you content with the proposals that ADR should be

provided and funded by approved tenancy deposit schemes or do you think there

might be more effective and affordable alternatives?

Yes, it will be important to keep the ADR free at point of access. We see the

Private Rented Housing Panel as being the most appropriate provider of disputeresolution as the infrastructure is already in place for dealing with repairs disputes,

and the panel has the power to make visits to the property if necessary. Expanding

the remit of the PRHP would save money by avoiding duplication in setting up a newADR provider and capitalise on existing expertise.


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Question 20: Is the proposal to apply a lower limit of 15 for disputes anappropriate approach to ensuring that the costs of ADR are not disproportionate to

the amount of deposit that may be disputed?

Yes, pursuing claims lower than 15 would make the scheme not cost

effective. It should be set and be the same as the cost of taking action via the small

claims court.

Question 21: Are you content with the proposal for ADR to be free of chargefor tenants and landlords, at the point of access?

Yes, this would allow for all tenants to be able to raise complaints, no matter

what their financial situation.

Question 23: Do you have additional views on how approved schemes

should be publicised?

Approved schemes should be promoted to all landlords and letting agents that

are registered with the council. It should also be advertised to tenants, in lettingagents and estate agents. Online promotion would be particularly useful for targetingyounger tenants e.g. students. As students make up a considerable proportion of

the private rented housing market, publicity materials should be provided toeducational institutions and student advice centres. All information materials must be

in plain English (with versions in other languages). To assist the landlord with

providing prescribed information to the tenants, template letters could be made

available (in much the same way as the materials currently available on the PRHPwebsite).

Question 24: Do you support the proposals in relation to the requirement for

landlord to provide information about his or her registration status?

Yes, it is important that the tenant knows that his/her landlord is registered.

Question 25: Are there any other circumstances in which you think it would

be appropriate for a scheme administrator to share information with local

authorities? For example, of sanctions and penalties applied to a landlord, or theoutcome of an adjudication found against a landlord.

Yes, details of those who fail to operate within the regulations should bepassed to the local authorities who should consider this information when consideringapplications for, or renewals of, HMO licences. In addition the scheme should tie in

with the fit and proper person test for landlord registration (Part 8 of theAntisocial Behaviour etc. (Scotland) Act 2004) it is envisaged that repeat offenders

under the scheme would fail the test and would therefore not be permitted to be

landlords any more. This should be publicised also, to act as a deterrent.

Question 26: Do you agree with the proposals relating to the requirement

for approved schemes to submit annual and quarterly reports to Scottish Ministers?


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Yes, schemes would be much more reliable if kept under public scrutiny.

Question 27: Do you have any other ideas which might help address theproblems encountered by tenants when their deposit is unfairly withheld? As part ofthis, what is your view on the desirability of banning the practice of taking of tenancy

deposits in Scotland?

We believe that the idea of withdrawing deposits is probably unworkable. We

have concerns that landlords would simply increase rents in order to build up adeposit-type sum by the back door. It would be difficult if not impossible to police.The custodial scheme appears to be simple to understand and relevant to Scotland

for the number of people potentially using the scheme. We are worried that byhaving an insurance scheme as well as the deposit scheme that this would confuse

the schemes and make them less streamlined. We also strongly encourage thecreation of an escalating scale of sanctions to discourage those who would be repeat

offenders. We would also strongly support involving the PRHP in the dispute

resolution process.

Tenancy Deposit GUSRC Response

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