If you're renting out your property, you may want to take a deposit from your new tenant before they move in.
A deposit is a sum of money which acts as a guarantee against:
- damage to the property
- cleaning bills if the property is left in poor condition
- bills that are left unpaid, like fuel or telephone bills
- unpaid rent
If any of the above happens, the deposit can be used to cover costs so you do not have to pay them.
If there are no issues when the tenant moves out, their deposit should be paid back to them in full.
The amount that can be charged as a deposit cannot be more than two months' rent. For example, if the rent is £500 a month, you cannot ask for more than a £1000 deposit.
Tenancy deposit schemes
Once your new tenant has paid the deposit for the property, you have to lodge it with a tenancy deposit scheme within 30 working days of the tenancy starting.
There are three tenancy deposit scheme providers to choose from in Scotland:
Once you register the deposit with one of these providers, you have to give written information to your tenant:
- the amount of the deposit and the date you received it
- the date the deposit was paid into the tenancy deposit scheme
- the address of the property
- a statement confirming you're registered (or have applied to be registered) as a landlord for the property with the local council that covers the area where your let property is located
- the name and contact details of the tenancy deposit scheme provider you used
- the circumstances in which all or part of your deposit may be kept at the end of the tenancy
If your tenant has an arrangement with you to pay their deposit in instalments, you must give them this information in writing for each instalment.
If you do not use a tenancy deposit scheme your tenant can apply to the First-Tier Tribunal for Scotland (Housing and Property Chamber), either during the tenancy or up to three months after it ends. The Tribunal can order you to pay up to 3 times the deposit to your tenant.
There are some circumstances where you do not have to use a tenancy deposit scheme. You do not need to register a deposit if:
- you return the full deposit to the tenant within 30 working days of the beginning of the tenancy
- the landlord and tenant are family members
- the tenancy is a 'liferent' which means the tenant has 'a formal right to use the property during their lifetime'
- the property is a holiday home
- the property is used by a religious organisation
- the property is supported accommodation
- it's an agricultural or crofting tenancy
- you're also a resident in the property
- the property is subject to control orders
- transitory ownership – where ownership of a house is short-term, e.g. a house which has been repossessed by a mortgage lender or a house held for up to 6 months by executors dealing with a deceased person's estate
Returning the deposit
As the landlord, you must contact the tenancy deposit scheme provider and ask them to return the deposit. You should contact the provider as soon as possible after the tenancy ends.
You should tell the provider how much of the deposit should go back to the tenant and, if there are any repairs or cleaning work to be done, how much of it should go to you to cover these costs.
The provider will then ask the tenant if they agree with the amount to be returned to them. They have to write back within 30 working days to confirm whether they agree or disagree.
If they don't reply, their share of the deposit will stay in the scheme and you'll get your share.
If you are not due any money from the deposit, let the tenancy deposit scheme know as soon as possible, so the tenant can be repaid quickly.
At the end of a tenancy, a landlord and tenant should always try to agree on any deductions from a tenant's deposit. If agreements can't be reached, the schemes offer a free dispute resolution service where an independent adjudicator looks at evidence from both tenant and landlord within specified timescales.
Making a decision
They make a decision on how the deposit should be returned. It's usually the landlord (or agent) who submits a repayment proposal, but the tenant can make an application too.
A tenant doesn't have to use dispute resolution but if they request a referral – you must enter into the dispute resolution process.
You must prove that you have a claim to retain some or all of the deposit. If you can't – the adjudicator must return the deposit to the tenant.
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