Scottish landlord loses tenancy deposit protection appeal

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July 2012 saw the launch of tenancy deposit protection in Scotland and one of the first cases to reach the higher courts in Scotland has now been decided by the Sherriff Principal in the Sheriffdom of Lothian and Border
This was an appeal in the case of Samdup Tenzin (tenant) against Stuart Russell and Laura Clark (landlords) where the tenant was originally awarded a penalty of three times the deposit for the failure of the landlords to protect the deposit.
The case related to a tenancy which started on 1 May 2012 and ended on 17 December 2012.  The deposit was £750.  The landlords did not pay the deposit into a tenancy deposit scheme by the deadline date (in this case) of 13 November 2012.  The tenant had three months from the end of the tenancy to seek a judgment from the Sheriff that the landlords had failed to protect the deposit in accordance with the Regulations.  The Sherriff issued an order against the landlords requiring them to pay three times the deposit to the tenant.
The landlords appealed this decision mainly on technical grounds relating to the way the first hearing had been conducted but also in relation to the maximum penalty being awarded. 
The Sheriff Principal decided that the landlord had a duty to protect the deposit and had failed to do so.  Whilst the sanction was a penalty with a maximum level of three times the deposit the Sheriff Principal said that “the primary object of sanctions is to enforce or certainly encourage compliance with obligations or duties and to prevent default”.  The Sheriff Principal went on to argue that the “the Sheriff has complete discretion as to the level of the order and is constrained only by the amount of the deposit and a triple multiplier”
The Sheriff Principal said that in this case the landlords did not produce any evidence in mitigation as regards the penalty.  Indeed as the landlords had deducted monies from the deposit rather than going through a tenancy deposit scheme the landlords had clearly breached the regulations.  As such the Sheriff Principal argued that there was no basis on which “I can or should interfere with the Sheriff’s decision.  As such the appeal was dismissed and costs were awarded to the tenant.
Implications
This case shows that the courts in Scotland are taking a robust approach to non-compliance with the legislation and where there is a blatant failure to comply the courts seem ready to apply the maximum penalty of three times the deposit and this has now been confirmed on appeal.  With evidence suggesting that there may still be areas of non-compliance with the 
legislation in Scotland such a case should be heeded by landlords who have not yet protected their deposit.
Steve Harriett
Chief Executive of the Dispute Service
The Dispute Service operates the Tenancy Deposits Scheme in England and Wales, TDS Northern Ireland and is a member of SafeDeposits Scotland, the largest of the three custodial deposit protection schemes in Scotland.

 July 2012 saw the launch of tenancy deposit protection in Scotland and one of the first cases to reach the higher courts in Scotland has now been decided by the Sherriff Principal in the Sheriffdom of Lothian and Border

This was an appeal in the case of Samdup Tenzin (tenant) against Stuart Russell and Laura Clark (landlords) where the tenant was originally awarded a penalty of three times the deposit for the failure of the landlords to protect the deposit.

The case related to a tenancy which started on 1 May 2012 and ended on 17 December 2012.  The deposit was £750.  The landlords did not pay the deposit into a tenancy deposit scheme by the deadline date (in this case) of 13 November 2012.  The tenant had three months from the end of the tenancy to seek a judgment from the Sheriff that the landlords had failed to protect the deposit in accordance with the Regulations.  The Sherriff issued an order against the landlords requiring them to pay three times the deposit to the tenant.

The landlords appealed this decision mainly on technical grounds relating to the way the first hearing had been conducted but also in relation to the maximum penalty being awarded. 

The Sheriff Principal decided that the landlord had a duty to protect the deposit and had failed to do so.  Whilst the sanction was a penalty with a maximum level of three times the deposit the Sheriff Principal said that “the primary object of sanctions is to enforce or certainly encourage compliance with obligations or duties and to prevent default”.  The Sheriff Principal went on to argue that the “the Sheriff has complete discretion as to the level of the order and is constrained only by the amount of the deposit and a triple multiplier”

The Sheriff Principal said that in this case the landlords did not produce any evidence in mitigation as regards the penalty.  Indeed as the landlords had deducted monies from the deposit rather than going through a tenancy deposit scheme the landlords had clearly breached the regulations.  As such the Sheriff Principal argued that there was no basis on which “I can or should interfere with the Sheriff’s decision".  As such the appeal was dismissed and costs were awarded to the tenant.

Implications

This case shows that the courts in Scotland are taking a robust approach to non-compliance with the legislation and where there is a blatant failure to comply the courts seem ready to apply the maximum penalty of three times the deposit and this has now been confirmed on appeal.  With evidence suggesting that there may still be areas of non-compliance with the legislation in Scotland such a case should be heeded by landlords who have not yet protected their deposit.

 

Steve Harriott

Chief Executive of the Dispute Service

The Dispute Service operates the Tenancy Deposits Scheme in England and Wales, TDS Northern Ireland and is a member of SafeDeposits Scotland, the largest of the three custodial deposit protection schemes in Scotland.

 


Posted by Steve Harriott, CEO on 4 February 2014

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