Private residential tenancy model agreement: easy read notes

11. Deposit

When a tenant moves into a rented home, most landlords will ask for a deposit. This is a sum of money which acts as a guarantee against various things, such as damage that the tenant may do to the property, costs for any cleaning which may be needed, bills (for example electricity) that are left unpaid, as well as any unpaid rent.

The total amount of the deposit cannot be more than 2 months' rent. If the tenant is charged more than two months' rent, then the tenant can contact Shelter Scotland or a Citizens Advice Bureau for advice about claiming back the extra amount. It is an offence to require payment of any premium (in addition to the rent and a refundable deposit of no more than two months’ rent) as a condition of the grant, renewal or continuance of a tenancy.

A deposit must be held by a tenancy deposit scheme until the end of the tenancy. This is to stop the landlord using a deposit as if it was their own money. Tenancy deposit schemes are run by independent companies which are approved by the Scottish Government. The landlord has to pay the deposit to one of the schemes within 30 working days from the start of the tenancy (working days are usually Monday to Friday - so 30 working days is usually 6 weeks). When a deposit is paid in instalments then each instalment must be lodged within 30 working days of that instalment being paid. There will be no charge to the tenant or landlord to pay the deposit into one of the schemes.

It is good practice for a landlord or letting agent to pay a deposit, or part deposit (when joint tenants pay their share of a deposit), to one of the approved tenancy deposit schemes as soon as possible after the start of the tenancy. This is very important as a landlord or letting agent has no authority to retain any deposit/part deposit at any time.

A landlord or letting agent is not permitted to charge any premiums. By paying any deposit received into a scheme promptly, a landlord/letting agent is clearly demonstrating that any deposit received is always being treated as a deposit and not as a premium.

Any retention of a deposit by a landlord or letting agent is a serious matter, as deductions from tenancy deposits can only be done by one of the approved tenancy deposit schemes in accordance with the Tenancy Deposit Regulations. The First Tier Tribunal (Housing and Property Chamber) will not look favourably at cases where the landlord or letting agent has deviated from paying the money into a tenancy deposit scheme. When a tenant has signed a tenancy and changes their mind a day or two before the tenancy is due to start, the deposit should be returned as any deduction from it would be equivalent to charging a premium.

Sometimes a landlord or letting agent will insert a discretionary (their own) clause in the private residential tenancy agreement to make clear about any reimbursement of expenses they will require if a tenant that has committed to a tenancy decides not to take up the tenancy shortly before it starts. Such reimbursement should not be deducted from the deposit. It is essential that a landlord or letting agent makes this clear from the outset in writing. A tenant should never be in any doubt about what they are signing up to and what obligations a landlord or letting agent has placed on them.

What happens when a deposit is lodged?

The tenant should receive a letter or email from the tenancy deposit scheme confirming that their deposit has been lodged. The letter will set out the amount of the deposit and explain how it will be repaid and how any disputes can be settled.

If the tenant does not receive a letter from an approved deposit scheme after 6 weeks, they should contact their landlord. If the landlord has not lodged their deposit, the tenant should raise a complaint with the Tribunal. If the landlord has not used one of the schemes, the Tribunal can order the landlord to pay up to 3 times the deposit to the tenant.

Within 30 working days after the start of the tenancy the landlord must give the tenant all of this information about the deposit:

• the amount of the deposit;
• the date that the landlord received the deposit and the date that the landlord paid the deposit into a scheme;
• the address of the property to which the deposit relates - so the property let to the tenant;
• a statement from the landlord confirming the landlord is registered or has applied to be registered with the local council;
• the name and contact details of the tenancy deposit scheme where the deposit was paid;
• and the terms on which the deposit is held - including (1) when the deposit is to be returned to the tenant and (2) the circumstances where the landlord can be paid some or all of the deposit at the end of the tenancy, instead of the deposit being paid back to the tenant.

Examples of money that the landlord can ask to be paid by the scheme (and not paid back to the tenant) are:

• unpaid rent
• other amounts not paid or the cost of any repairs needed if the tenant caused the damage
• to pay bills left unpaid by the tenant

If there are no issues like that at the end of the tenancy, then the landlord should ask the scheme to pay the full amount of the deposit back to the tenant.

At the end of the tenancy the landlord should ask the tenancy deposit scheme to release the deposit and the amounts payable to the tenant and the Landlord.

The deposit scheme will contact the tenant to check whether the tenant agrees with the landlord's figures.

Different things happen, depending on whether the tenant agrees with the landlord's figures or not:

• If the tenant agrees with the landlord's figures, then the scheme will pay those amounts to the landlord and tenant.
• If the tenant does not agree with the landlord's figures, then the tenant must contact the landlord. The landlord and the tenant need to try to agree what, if any, amount is to be deducted from the deposit and kept by the landlord. If the landlord and tenant cannot agree, the tenant can ask the Tenancy Deposit Scheme which holds their deposit to use their dispute resolution process. The dispute will be sent to an independent adjudicator who has the role of reaching a decision in a dispute. The adjudicator will be given any evidence (for example photographs or receipts) and will come to a decision about the amount (if any) to be given by the scheme to the landlord and the amount to be repaid to the tenant.

If the tenant does not respond within 30 days, then the landlord will be paid the amount that the landlord requested be deducted for rent, repairs and other costs - and the rest (if anything is left) will be repaid to the tenant. If the landlord has not, by the time that the tenancy ends, asked the scheme to release the deposit, then the tenant can apply to the deposit scheme for repayment. In that case, the deposit scheme will contact the landlord to ask whether the landlord agrees that the whole deposit should be repaid to the tenant or whether the landlord thinks that an amount should be taken off and paid to the landlord.

If the landlord does not agree that the whole deposit should be repaid to the tenant, then the landlord can try to agree the figures with the tenant. But if the landlord and tenant cannot agree the figures, then the decision is referred to an independent decision-maker.