Sheriff Court case in which the tenants under a short assured tenancy of property at Cumberland Street in Edinburgh sought to enforce the terms of the Tenancy Deposit Schemes (Scotland) Regulations 2011 against their landlord (an experienced property agent).

The landlord terminated the lease (on 12^th January 2013) and retained the tenants’ deposit of £1150. When the tenants contacted the landlord to recover the deposit (on 17^th February 2013), the landlord  claimed that he was entitled to retain the deposit due to damage caused to the premises by the tenants (but failed to produce any evidence). After lengthy correspondence between the parties the landlord repaid half the deposit to the tenants.

The 2011 Regulations obliged landlords to pay deposits to the scheme administrator of an approved tenancy deposit scheme by 24th November 2012 and also provides a free dispute resolution scheme in relation to the return of the deposits. If a landlord fails to comply with his obligations under the regulations, he is obliged to pay an amount not exceeding three times the amount of the deposit to the tenant.

The landlord admitted that it had failed to comply with his obligations under the regulations but argued that, following the correspondence, the parties had settled the matter and that, as the most the tenants would have been entitled to in terms of any arbitration under the statutory dispute resolution scheme was £1150, payment of three times the deposit was excessive.

The sheriff ordered that an amount of £3450 be paid to the tenants. The amount to be paid was not compensatory; it was a sanction or a penalty analogous to an award of punitive or exemplary damages[1]. In exercising the courts “unfettered discretion” when assessing the amount to be paid, the sheriff took account of the following:

“In this case the landlord was someone who may be presumed to have special knowledge of his obligations both in terms of the 2011 Regulations and the 2004 Act[2]. He failed to comply. It is averred that it was due to “oversight”. No further information was provided by [the landlord's solicitor]. In my opinion no proper explanation for his failure has been provided. He claimed retention of the pursuers’ deposit but failed to produce any evidence to support his claims. Had the dispute resolution procedure been available he would have been unable to seek retention of any part of the deposit without producing relevant evidence. The pursuers were placed in an invidious position and a compromise was reached on economic grounds. The fact that offers to settle this action have been made is in my opinion irrelevant to the issue to be determined.”