Tenancy deposit schemes are a good idea.
Introduced in 2012, they were designed to deal with the problem of the minority of private landlords who withhold their deposits for spurious reasons. The new rules mean all landlords have to register deposits with the schemes within 30 days of the tenancy starting and in the event of disagreement at the end of the tenancy, the schemes can arbitrate over whether any of the deposit should be withheld. In theory, it means landlords are prevented from behaving badly over deposits and any disputes can be resolved in a fair and independent way.
However, there have been teething problems, not least the fact that many landlords are still not lodging deposits with the scheme three years on from its introduction even though it is a legal requirement to do so. And now another major unforeseen consequence has emerged with the news that the three tenancy deposit schemes approved by the Scottish Government are holding almost £400,000 in deposits which have never been claimed back by the tenants.
It is a problem that was simply not foreseen when the schemes were introduced three years ago and in many ways that is understandable. Why would a tenant who has handed over hundreds of pounds in a deposit walk away without reclaiming it? The answer is that in the private rented sector, circumstances can change very quickly; students for example can make their way through many tenancies in a short space of time. And if a tenant changes their contact details, that can make it hard for the schemes to track them down (although one of the schemes SafeDeposits Scotland says it tries every possible avenue to track the tenants down).
Whatever the reason for the unclaimed deposits, the money is now piling up and it could soon tip over the £1million mark, which raises the question of what should happen to it if the tenants cannot be traced. Under the current rules, the money will revert to the Crown after six years, to be spent by the UK Treasury as it sees fit, but that cannot be acceptable. Thanks partly to the problems many face acquiring mortgages and partly due to the lengthy waiting lists for social housing, the private rented sector is expanding rapidly, but it is a sector that is in dire need of investment and reform. Instead of disappearing into the UK Government's coffers, the money should be used to improve the communities where the tenants live.
This would mean a change in the law less than three years after the new schemes were introduced, but it is better that than the unclaimed money reverting to the Crown. The tenancy deposit schemes have been a qualified success and, with take-up improving all the time, they have reduced the number of landlords and agents who keep deposits for no good reason. But not only is stricter enforcement required to ensure that as close to 100 per cent of landlords as possible take part in the scheme, a rethink is required on the pot of unclaimed deposits. More and more Scots are having to rent in the private sector - the unclaimed deposits could be used to make that sector better.
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