Upper Tribunal finds scheme-to-scheme transfer of tenancy deposit without landlord notification did not breach regulations

About this case:

• Citation:
  2025UT24
• Judgment:
  External link
• Court:
  Upper Tribunal for Scotland
• Judge:
  Sheriff Kelly

Appellants Elekwachi and Chinyelugo Ukwu rented a property in Bishopton from David and Kelly Ann Tait through a letting agency from 2020 to 2023. Only one of their grounds of appeal was permitted to proceed, which argued that the First-tier Tribunal for Scotland had mischaracterised their claim.

The appeal was considered by Sheriff Tony Kelly solely on the basis of written submissions, with none of the parties appearing at the appeal hearing.

Alteration in custody

At the outset of their tenancy in July 2020, the appellants paid a deposit of £1,695 that was lodged with an approved scheme, Letting Protection Services Scotland. In April 2023, the respondents’ letting agents, Belvoir, issued an instruction to LPSS for the deposits for numerous tenancies managed by them to be transferred to Safe Deposits Scotland, another approved scheme. While SDS issued a statutory notice confirming receipt of the funds to the appellants, the respondents did not advise the appellants of the transfer themselves, in breach of regulation 43 of the Regulations.

Following termination of the tenancy, the Applicants lodged an application with the tribunal seeking that a penalty be imposed upon the respondents due to their failure to comply with the regulations. The First-tier Tribunal held that there was no provision for the imposition of a penalty for breaches of regulation 43 and, even if there was, this would have been de minimis.

In their written submissions, the appellants stated that the FTS mischaracterised their claim as being about a failure to intimate timeously the transfer of the tenancy deposit with the receiving scheme. The basis of their application was a breach of regulation 3, namely that the landlords failed to provide them with the prescribed information set out in regulation 42 upon payment of their deposit to a scheme administrator.

The appellants further contended that, where there was an alteration in the custody and protection of the deposit, notification of this ought to be intimated within 30 days of the payment to the new scheme administrator. The FTS ignored this requirement in assessing their claim.

Ordinary and natural meaning

In his decision, Sheriff Kelly said of the nature of the breach: “This application to the FTS concerns a complaint that there was a failure on the part of the landlord to tell the tenants of that transfer. This is a significant change. The identity of the scheme administrator in which the tenancy deposit rests must be made known to the tenant. That is clear from the regulations as a whole and is particularised in certain respects.”

He continued: “Precisely how that failure is to be characterised, either as a failure to comply with regulation 42, or a failure in respect of regulation 3 (as the appellants contend), comes down a construction of the relevant regulations.”

Considering whether regulation 3 could be applied to scheme-to-scheme transfers, the sheriff said: “I reject the submission that regulation 3(1) has application to the transfer of funds from scheme administrator to scheme administrator. Rather, regulation 3(1) can be given its ordinary and natural meaning as imposing an obligation upon a landlord, within 30 working days from the beginning of the tenancy, to pay the deposit to the scheme administrator and to tell the tenant who 15 that is, and to provide the necessary other information in terms of regulation 42.”

He concluded: “In light of the findings in fact made by the FTS, there was no hiatus in the protection afforded to the tenants. There was no period during which the tenancy deposit was not with a scheme administrator. The appellants had suspicions to the contrary. These were not made out. The failure to properly intimate the change of scheme administrator in respect of the tenancy deposit is a breach of the duty incumbent upon the landlord relative to regulation 43. As the FTS correctly found, there is no power provided in the regulations for payment of a penalty, fine or sanction arising from this breach of duty.”

The appeal was therefore refused, with the original decision of the FTS upheld.