Largs based letting agents, Colvin Houston Limited, received a fine for not securing two tenancy deposits taken on behalf of their landlord clients when the case was heard at Kilmarnock Sheriff Court recently.
The two deposits amounted to £925. The letting agents, who pleaded guilty, were initially fined £750 but this was reduced to £500 to take account of their early plea.
This was the first time a letting agent had been sanctioned for failing to place a deposit in a scheme since the Tenancy Deposit Schemes (Scotland) Regulations 2011 were introduced five years ago. This is because the Regulations ultimately place the duty to secure deposits on a landlord irrespective of whether a professional agent has been appointed.
However, Consumer Protection legislation was used to target the letting agents in this particular case. North Ayrshire Council’s Trading Standards Team received a complaint from a landlord client of the letting agent which triggered the investigation. The Consumer Protection from Unfair Trading Regulations 2008 (the 2008 Regulations) was applied to argue that the letting agent had engaged in an ‘unfair commercial practice’. Under the 2008 Regulations, a commercial practice is deemed to be unfair if it fails to meet the special standard of skill and care to be expected in the trader’s field of activity. Regulation 8 creates the offence of ‘knowingly and recklessly’ engaging in a practice which does not meet the expected standard of skill and care.
Trading Standards successfully argued that paying a tenancy deposit into an approved scheme is the standard of skill reasonably expected of a letting agent and failure to do so is an offence under consumer law.
Interestingly, the letting agent in this case initially sought to argue that the landlord in question was not a ‘consumer’ but this argument was not accepted by the court. This acts as a warning for letting agents who presume they are contracting with commercial landlords as opposed to consumers. As we have previously advised in relation to charging commission, it is not always clear whether a landlord is a consumer. Letting agents should demonstrate caution and assume that landlords are consumers unless there is strong evidence to the contrary.
Separately, it should be noted that the Code of Practice for Letting Agents, which comes into force in January 2018, also places a duty on letting agents to inform landlords of their obligations under the Tenancy Deposit Schemes (Scotland) Regulations 2011. Letting agents should therefore ensure they are up to speed with those Regulations.
In summary, all tenancy deposits must be placed in an approved scheme within 30 working days of the beginning of the tenancy in question. There are currently three approved schemes operating in Scotland. These are:
- Letting Protection Service Scotland
- Safe Deposits Scotland
- My Deposits Scotland
It is also vital that letting agents set out clearly in their terms of business the services they will undertake in respect of tenancy deposits and, equally important, the responsibilities they will not assume. If you are a letting agent and would like advice on your obligations, or to discuss a review of your agency agreement or terms of business, please feel free to contact us. If you are not already a member, please join the Scottish Private Letting Forum on LinkedIn where we post regularly about these and other issues.
