At the inaugural LetLaw Legal Update seminar in Glasgow, the hot topic was the launch of the Scottish tenancy deposit scheme and how this will work in practice.

Whilst there was plenty of discussion surrounding ways of avoiding the scheme (!), the primary concern of both landlords and letting agents appeared to be what would happen if a scheme was to fail.

The Tenancy Deposit Scheme Regulations 2011 were issued by the Scottish Government earlier this year.? Under those Regulations, any organisation who applies to run a ?tenancy deposit scheme in Scotland must ensure they comply with a particular scheme model.?? In addition to this, the?organisation will have to meet various criteria:-

• It will have to pass a similar ?fit and proper person? test that landlords face when applying for registration with the local authority.
• At all times it must ensure that the sums held by the scheme are not less than the total amount of deposits held.
• It must operate under a business plan that enables it to accept and safeguard deposits and cover the cost of its own operation, although the Scottish Government can offer financial assistance if need be.
• It must have procedures to safeguard deposits and ensure repayment if the scheme fails or ceases to be operational.

Once approved, a scheme will have to provide annual reports to the Scottish Ministers detailing how the scheme is operating and its performance during the financial year. The report must include certain information, including:-

• Total value of tenancy deposits held by the scheme
• Statement of the financial position of the scheme including independent audited accounts and a breakdown of income and expenditure during the financial year
• A forecast budget for the following year

In addition, the scheme will have to provide quarterly performance reports to the Scottish Ministers measuring its own performance against the key performance indicators set by the legislation.

The Regulations have been drafted to ensure that the approved schemes will be closely monitored. It is hoped that this will at the very least allow the Scottish Ministers to step in before it is too late.

Landlords shouldn?t be overly concerned about depositing funds to the schemes, but only time will tell how this will all work in practice. ? We?will keep you informed!

If you have any specific legal queries about a property you let or how forthcoming legislation may affect you, get in touch.