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Tenancy Deposit GUSRC Response

Tenancy Deposit GUSRC Response

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11/12/2010

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1 of 7 September 3, 2010 Business Support Team Housing Markets and Supply Scottish Government Mail Point 19 Area 1-J South

Victoria Quay Edinburgh EH6 6QQ

To Whom It May Concern: We welcome the opportunity to respond to the consultation on Tenancy Deposits Scheme (Scotland) Regulations 2010 draft. While we broadly welcome the scheme in principle I have attached our detailed response to the questions posed in the consultation document. I hope that our feedback is considered in detail and that the views of the students that we represent are fully considered during the consultation process. We are very enthusiastic about a tenancy deposit scheme being introduced in Scotland as many of our members live in privately rented accommodation and these proposals would affect them directly. Indeed at our advice centre deposit cases accounted for 50% of accommodation casework entries, or 14% of total casework, which indicates that they are relatively complex and timeconsuming. Glasgow University Students’ Representative Council represents the interests of over 25,000 students registered at the University of Glasgow to the University and nation. Council comprises up to 37 elected students who meet throughout the year, and is a fully independent representative organisation being non-affiliates of NUS (National Union of Students). Sincerely,

Mr Fraser Sutherland Vice-President (Student Support) Glasgow University Students Representative Council John McIntyre Building, University Avenue, Glasgow G12 8QQ telephone: (0141) 339 8541 ¦ fax: (0141) 337 3557 ¦ email: enquiries@src.gla.ac.uk ¦ www.glasgowstudent.net Scottish charity No. SC006970

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Glasgow University Students’ Representative Council: Detailed response to the Tenancy Deposits Scheme (Scotland) 2010 consultation. Question 1: Do you support the proposal that the tenancy types covered by the tenancy deposit scheme should be aligned with existing landlord registration legislation? Yes, one system of governance would give tenants more confidence in the private rental system. However, we do not agree that resident landlords should be exempt from the tenancy deposit scheme. Our view is that any landlord who takes a deposit from a tenant should be required to protect that deposit in an approved scheme. Question 2: Do you agree with the provisions relating to the date that the duty to comply should take effect for tenancies covered by tenancy deposit regulations? Yes, a fixed date for the scheme to start would allow both landlords and tenants time to become aware of the regulations. Question 3: Do you consider that the sanctions are appropriate and proportionate to the action or inaction that prompts them? No, while the proposals are an appropriate and proportionate response to first time offenders, we believe that more stringent action should be taken against repeat offenders. Question 4: Are there additional sanctions that you think would be more appropriate and effective? If so, how would they be enforced? For repeat offenders tougher financial penalties should be available. This could take the form of an escalating scale of sanctions culminating in a temporary or lifetime ban for a landlord who consistently breaks the regulations. This would help protect future private accommodation tenants. Sanctions for non-compliance should be tied into the “fit and proper person” test for private landlord registration under Part 8 of the Antisocial Behaviour etc. (Scotland) Act 2004 Question 5: The regulations currently provide for sanctions to apply to the person who receives the deposit and fails to comply with tenancy deposit regulations. Do you agree with this? We believe that the legislation should stipulate that tenants are free to pursue either the landlord or letting agent regardless of who actually physically receives payment of the initial deposit. We have direct experience of both landlords and letting agencies attempting to shift the focus of legal responsibility on to each other. For example we have dealt with a case previously whereby we raised small claims John McIntyre Building, University Avenue, Glasgow G12 8QQ telephone: (0141) 339 8541 ¦ fax: (0141) 337 3557 ¦ email: enquiries@src.gla.ac.uk ¦ www.glasgowstudent.net Scottish charity No. SC006970

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court action against a letting agency who had disclosed only the name of the landlord and no other details. The letting agency tried to have the claim dismissed on the basis that we should have sued the landlord and we had to obtain a legal opinion to help us continue. The legal counsel we sought advised us that this was an ambiguous area of the law which is why we believe these new regulations are an excellent opportunity to clarify this point. Furthermore we have also encountered a scenario involving us suing a landlord after his letting agent had gone into administration. The Sheriff Clerk returned the small claims papers stating that we should be suing the administrator of the letting agency and that the case would be thrown out if it went before a Sheriff. We had to send information to the court about the law of agency in order that the claim could proceed. We believe the requirement to be well versed in this already complex area of law is preventing access to justice for the very individuals it is designed to serve. Question 7: Do you think that the regulations should require a financial penalty to be imposed in all cases? Yes, the legislation should provide for a minimum financial penalty with an unlimited maximum penalty at the sheriff’s discretion. This should act as a deterrent to those who would breach the regulations. A minimum financial penalty is also in keeping with the necessary transparency of the scheme, landlords and tenants alike would be aware from the outset of the possible financial implications of noncompliance. Question 8: Should the court have discretion to decide on the amount of financial penalty? Yes, different cases may deserve different levels of penalty. It would be appropriate to deal with repeat offenders more severely than a first time breach. Question 9: If your response to Question 8 is yes, do you think there should be a minimum penalty e.g. at least an amount equal to the deposit? Yes, an amount three times the deposit would be an appropriate penalty for those who have failed to meet their obligations as a deposit holder. The timescales set out in the draft proposals allow adequate time for a secure deposit scheme/insurance provider to be sought by the deposit keeper. This would be complemented by a system which provides for the courts to penalise repeat offenders more severely. Question 10: The regulations permit a scheme to hold deposits in a designated interest bearing account. Do you have any views on whether other types of investment should be allowed? We would be against any investments beyond those in interest bearing accounts, with interest generated being used to cover the costs of the scheme.

John McIntyre Building, University Avenue, Glasgow G12 8QQ telephone: (0141) 339 8541 ¦ fax: (0141) 337 3557 ¦ email: enquiries@src.gla.ac.uk ¦ www.glasgowstudent.net Scottish charity No. SC006970

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Question 11: Do you have any views on the provisions relating to the use of excess income accrued on deposits? Income generated should allow for the administrator to hold the deposits and cover administration costs without charging the tenant or landlord an administration fee. We would like to see the scheme make a contribution, from any excess income accrued, to the running of the Private Rented Housing Panel, which we would see as the natural place to deal with disputes about deposit return. We would also suggest that consideration be given to donating a proportion of the excess to charities working in the residential sector. Question 12: Do you have any particular views on the requirement for schemes (particularly insurance schemes) to be available to all landlords? A common system across the country would allow for transparency to all tenants and keep the system relatively easy to understand. Question 13: Do you consider that both custodial and insurance scheme models afford adequate protection for tenancy deposits and should be permitted in the regulations? No, the custodial scheme seems equipped to award a quicker payment of disputed monies. It would be important to make sure that any insurance providers were fully regulated and protected in case of them ceasing to trade at any point during a tenancy and thus unable to fulfil their role in safeguarding the deposit. We have some concerns about the insurance schemes based on anecdotal evidence from England whereby landlords and letting agents appear to have been passing the cost of the insurance scheme on to tenants. Custodial schemes are free to use at the point of delivery, the model is simple and transparent. Further, there are no actual cash costs which a landlord can pass on to the tenants. It therefore would be difficult for landlords to use obfuscation to argue the existence of additional hidden costs when attempting to impose additional charges on tenants. The custodial scheme is therefore our preferred option. Although both types of scheme are available in England, we do not consider that Scotland requires exactly the same model as England, given the lower numbers involved. We are also dubious about the potential interest any third party agency would have in setting up or becoming involved in a system which accommodated both the insurance and the custodial schemes. We see the custodial scheme as being sufficient. Removing the need to choose between schemes has the added attraction of being simpler for landlords, and should make the system easier for both landlords and tenants to understand.

John McIntyre Building, University Avenue, Glasgow G12 8QQ telephone: (0141) 339 8541 ¦ fax: (0141) 337 3557 ¦ email: enquiries@src.gla.ac.uk ¦ www.glasgowstudent.net Scottish charity No. SC006970

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Question 14: The regulations currently only provide for fees to be charged in respect of insurance schemes. Do you think that fees should also be permitted for custodial schemes? No, the accrued interest on the deposits should be used to cover the costs of the scheme. Fees would add to the cost of renting private accommodation, as these would most likely be passed on to the tenant. As many of these tenants already find the costs of renting expensive and sometimes unaffordable, extra fees could add to this burden. Question 18: What are your views on whether approved schemes should repay deposits to lead tenants if so used, or to individual tenants? Individual tenants must be safeguarded under the new scheme; otherwise there may be similar problems to those already experienced with deposit returns between fellow flatmates. Failure to offer individual protection would put many tenants of HMO properties in the unfair position of having to pursue legal action to receive back deposits from fellow tenants at their own personal cost. With many HMO tenants being from a less secure financial position they would also be among the most susceptible to the financial consequences of not having their deposits returned. In addition a lead tenant may choose not to pursue legal action thereby causing all tenants to forfeit their deposits without any right of redress against the landlord or letting agent. This would undermine the aim of the legislation which has been set out to protect these people who are some of the most disadvantaged in society. It should be possible to protect the deposit for a joint tenancy in one account, but the rules should provide that all the tenants must be named on that account. In our experience we have encountered instances where some landlords have failed to put all tenants on the tenancy agreement in order to avoid HMO licensing. This would put further pressure on those landlords to comply with the law. Question 19: Are you content with the proposals that ADR should be provided and funded by approved tenancy deposit schemes or do you think there might be more effective and affordable alternatives? Yes, it will be important to keep the ADR free at point of access. We see the Private Rented Housing Panel as being the most appropriate provider of dispute resolution as the infrastructure is already in place for dealing with repairs disputes, and the panel has the power to make visits to the property if necessary. Expanding the remit of the PRHP would save money by avoiding duplication in setting up a new ADR provider and capitalise on existing expertise.

John McIntyre Building, University Avenue, Glasgow G12 8QQ telephone: (0141) 339 8541 ¦ fax: (0141) 337 3557 ¦ email: enquiries@src.gla.ac.uk ¦ www.glasgowstudent.net Scottish charity No. SC006970

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Question 20: Is the proposal to apply a lower limit of £15 for disputes an appropriate approach to ensuring that the costs of ADR are not disproportionate to the amount of deposit that may be disputed? Yes, pursuing claims lower than £15 would make the scheme not cost effective. It should be set and be the same as the cost of taking action via the small claims court. Question 21: Are you content with the proposal for ADR to be free of charge for tenants and landlords, at the point of access? Yes, this would allow for all tenants to be able to raise complaints, no matter what their financial situation. Question 23: Do you have additional views on how approved schemes should be publicised? Approved schemes should be promoted to all landlords and letting agents that are registered with the council. It should also be advertised to tenants, in letting agents and estate agents. Online promotion would be particularly useful for targeting younger tenants e.g. students. As students make up a considerable proportion of the private rented housing market, publicity materials should be provided to educational institutions and student advice centres. All information materials must be in plain English (with versions in other languages). To assist the landlord with providing prescribed information to the tenants, template letters could be made available (in much the same way as the materials currently available on the PRHP website). Question 24: Do you support the proposals in relation to the requirement for landlord to provide information about his or her registration status? Yes, it is important that the tenant knows that his/her landlord is registered. Question 25: Are there any other circumstances in which you think it would be appropriate for a scheme administrator to share information with local authorities? For example, of sanctions and penalties applied to a landlord, or the outcome of an adjudication found against a landlord. Yes, details of those who fail to operate within the regulations should be passed to the local authorities who should consider this information when considering applications for, or renewals of, HMO licences. In addition the scheme should tie in with the “fit and proper person” test for landlord registration – (Part 8 of the Antisocial Behaviour etc. (Scotland) Act 2004) it is envisaged that repeat offenders under the scheme would fail the test and would therefore not be permitted to be landlords any more. This should be publicised also, to act as a deterrent. Question 26: Do you agree with the proposals relating to the requirement for approved schemes to submit annual and quarterly reports to Scottish Ministers? John McIntyre Building, University Avenue, Glasgow G12 8QQ telephone: (0141) 339 8541 ¦ fax: (0141) 337 3557 ¦ email: enquiries@src.gla.ac.uk ¦ www.glasgowstudent.net Scottish charity No. SC006970

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Yes, schemes would be much more reliable if kept under public scrutiny. Question 27: Do you have any other ideas which might help address the problems encountered by tenants when their deposit is unfairly withheld? As part of this, what is your view on the desirability of banning the practice of taking of tenancy deposits in Scotland? We believe that the idea of withdrawing deposits is probably unworkable. We have concerns that landlords would simply increase rents in order to build up a deposit-type sum ‘by the back door’. It would be difficult if not impossible to police. The custodial scheme appears to be simple to understand and relevant to Scotland for the number of people potentially using the scheme. We are worried that by having an insurance scheme as well as the deposit scheme that this would confuse the schemes and make them less streamlined. We also strongly encourage the creation of an escalating scale of sanctions to discourage those who would be repeat offenders. We would also strongly support involving the PRHP in the dispute resolution process.

John McIntyre Building, University Avenue, Glasgow G12 8QQ telephone: (0141) 339 8541 ¦ fax: (0141) 337 3557 ¦ email: enquiries@src.gla.ac.uk ¦ www.glasgowstudent.net Scottish charity No. SC006970

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