In a recent case where a claim of breach of the Regulations was upheld by the courts, the landlord was ordered to pay penalties to their tenant. It is also worth noting that the Court of Session will not interfere with the Sheriff’s discretion to apply a penalty.
This case is significant because although there have only been four reported cases since the Regulations came into force, and only one of those cases proceeded to Appeal, landlords may be at risk of receiving severe penalties if they are continually non-compliant.
Case: Samdup Tenzin v Stuart Russell and Laura Clark [2015]
Facts
The tenancy commenced in April 2011 and a second lease was entered into in May 2012 until December 2012. A deposit of £750 was paid to the landlord, however, this was not placed into an approved Tenancy Deposit Scheme as required by the Regulations. £327.77 of the deposit was returned to the tenant 22 days after the termination of the tenancy and this was 34 days beyond the deadline for placing the deposit into an approved scheme. The landlord in this case failed to comply with the obligations set out in Regulation 3.
The tenant raised a claim at Edinburgh Sheriff Court by way of the requisite Summary Application. The tenant asked the Court to grant judgement for payment of £2250, an amount equal to three times the deposit in terms of Regulations 3 and 9. Sheriff Holligan granted an order for payment of £2250.
As reported by us in March 2014 (Lindsays Scottish Private Letting Forum - LinkedIn) the landlord appealed to the Sheriff Principal but his appeal was unsuccessful. The landlord then appealed to the Court of Session and the Court issued its decision on 28 January 2015.
Legal basis of appeal
The pertinent issue for the landlord here was that the Sheriff had taken into consideration irrelevant factors and his award was excessive, and decree should be awarded for a lesser amount.
The landlord argued the Sheriff had ignored that Regulation 10 provides a discretion to “..order the landlord to pay the tenant an amount not exceeding three times the amount of the deposit”. His breach was only a minor one as he was only 34 days late in placing the deposit into an approved scheme and the breach occurred during the transitional period of the Regulations.
Decision
The Court held that:
- It was not insignificant that the landlord had missed the transitional period deadline of 30 November 2012 for placing deposits in an approved scheme.
- The appellate court has a limited role in considering the exercise of the Sheriff’s discretion, saying:
“The appellate court will interfere only, for example, where the court below has not exercised its discretion at all, taken into account irrelevant considerations, or failed to take into account relevant ones. It is not sufficient merely that the appellate court might have come to a different decision on the facts. It is in the nature of discretionary decisions that two different minds might reach different decisions without it being the case that either decision can be categorised as wrong.”
Summary
The Court of Session (and indeed the Sheriff Principal) has a limited role in interfering with the decisions taken by Sheriffs regarding the Regulations and will only interfere when the Sheriff has not exercised his discretion, not taken into account relevant considerations or considered irrelevant issues. Not complying with time limits to place a deposit in an approved scheme can be considered a serious breach and lead to a sanction of paying three times the amount of the deposit to the tenant.
Comment
Landlords should always be aware of the strict time limits for placing a deposit in an approved scheme, abide by this and ensure that tenants are provided with the prescribed information. Even if it is only a few days late a Court could still impose a penalty. The actions of the landlord during the tenancy will also be taken into consideration in assessing the extent of the breach.
If landlords are unsure of their obligations they should seek legal advice.
This case highlights that the time limits specified in the Regulations must be complied with in order to avoid sanctions being imposed, however, a minor breach of the Regulations may not result in a maximum sanction.
If you are a landlord and would like advice on this issue, please contact a member of our Housing and Private Letting team
Notes:
Regulation 3(1) “A landlord who has received a tenancy deposit in connection with the relevant tenancy must, within 30 working days of the beginning of the tenancy:
- pay the deposit to the scheme administrator of an approved scheme; and
- provide the tenant with the information required under regulation 42.”
Regulation 9
- “A tenant who has paid a tenancy deposit may apply to the Sheriff for an order under Regulation 10 where the landlord did not comply with any duty in Regulation 3 in respect of that tenancy deposit.
- An application under paragraph (1) above must be made by summary application and must be made no later than 3 months after the tenancy has ended.”
Regulation 10
- “If satisfied that the landlord did not comply with any duty in Regulation 3 the Sheriff:
- must order the landlord to pay the tenant an amount not exceeding three times the amount of the tenancy deposit
- may as the Sheriff considers appropriate in the circumstances of the application, order the landlord to:
- pay the tenancy deposit to an approved scheme; or
- provide the tenant with the information required under regulation 42.”
Regulation 42 The landlord must provide prescribed information to the tenant within 30 days of payment of the deposit into a tenancy deposit scheme.
