New deal for tenants - rented sector reform proposals: consultation

Unclaimed tenancy deposits

The issue

When a tenant moves into a private rented property, most landlords or letting agents will ask for a deposit. This is a sum of money which acts as a guarantee against damage to the property, unpaid bills, or rent at the end of the tenancy.

A landlord or letting agent must protect any tenancy deposit taken within one of three approved tenancy deposit schemes until the end of the tenancy.

When a tenancy ends a landlord or letting agent is required to arrange the return of the deposit minus any reasonable deductions. The landlord or letting agent should do this as soon as they can after the tenancy ends.

Monitoring of the three approved tenancy deposit schemes has highlighted the previously unforeseen issue of unclaimed deposits. This is where the landlord has started the return of the deposit, but the tenant does not respond and cannot be contacted. Despite work by each of the scheme to return unclaimed deposits, there is now around £4 million of unclaimed tenant deposit funds between the three approved deposit schemes.

We want to reduce the likelihood that a deposit will be unclaimed by the tenant in future and put outstanding unclaimed funds to use to the benefit of tenants living in the private rented sector.

Overview of proposed change

57. We are considering making changes to regulations so that tenancy deposit schemes are required to request alternative contact details from the tenant when a tenancy deposit is lodged. This is intended to help make sure that a former tenant can be contacted to return a deposit at the end of a tenancy.

58. Alongside collecting alternative contact details, we also propose providing more information to tenants about unclaimed tenancy deposits to raise awareness of the issue and to be clear about what would happen if they don't reclaim their deposit.

59. A legal definition of an unclaimed deposits would be needed. Following previous consultation, we are considering the following definition:

• A deposit held by one of the relevant schemes is unclaimed where it has not been claimed for a period of 5 years from the date the landlord applies for the deposit to be repaid; and reasonable efforts have been made to return the deposit to the former tenant.

60. Unclaimed tenancy deposits funds would be able to be transferred to Scottish Government after a set amount of time. We want former tenants to be able to reclaim their deposit wherever possible. We are therefore looking at enabling former tenants whose unclaimed deposits had been transferred to the Scottish Government, to still be able to reclaim their deposit as follows:

i. Former tenants whose deposit was lodged with one of the approved schemes before the changes currently being looked at are made would be able to reclaim their deposit for 10 years from the point at which it became an unclaimed deposit;

ii. Former tenants whose deposit was lodged with one of the approved schemes after the changes currently being looked at are made would be able to reclaim their deposit for 5 years from the point at which it became an unclaimed deposit;

61. Even after these deadlines had passed, former tenants would still be able to reclaim their deposit where they could demonstrate reasonable excuse as to why they did not do so at an earlier date.

62. Former tenants who are looking to reclaim their deposit would do so through the relevant approved tenancy deposit scheme.

63. The unclaimed funds once available would only be able to be used for certain purposes to the benefit of private rented sector tenants as set out in law. For example:

a. advice, information and assistance to private tenants;

b. funding to persons or bodies that can assist private rented sector tenants to address barriers to the sector and support access to private rented housing;

c. activities that support private tenant participation and the representation of tenants' interests at a local and national level;

d. assisting private tenants to exercise their rights; and

e. the prevention of homelessness from the private rented sector.

64. The Scottish Government, or their delegated administrator, would be required to publish a report on the use of these funds within 3 years of them being transferred out of the schemes.

65. Approved tenancy deposit schemes would need to include additional information on unclaimed deposits as part of their monitoring returns to the Scottish Ministers.

66. This additional information would support the ongoing monitoring of unclaimed deposits and decisions to release unclaimed funds for use.

67. The questionnaire seeks views on the areas proposed for making use of unclaimed funds.