With a recent survey indicating that 55% of Scottish tenants renting in the private sector are unaware of the scheme, now is a good time for both landlords and tenants to remind themselves of the deposit protection requirments. Flexlaw Consultant Claire Maguire recently wrote on the scheme for “This is Money” -

Tenants ought to be advised by the landlord that their deposit is being placed into a tenancy deposit scheme, and who that was with – ie the scheme administrator details. There are currently 3 government-authorised schemes in Scotland, through The Letting Protections Service Scotland, Safedeposits Scotland and Mydeposits Scotland. It is the landlord’s obligation to provide the tenant with confirmation of the amount paid into the scheme, the name of the scheme administrator and date it was paid in, amongst others practical information per Regulation 42 of The Tenancy Deposit Schemes (Scotland) Regulations 2011. Failure to comply with these statutory obligations can result in court action being taken by the tenant against the landlord but here note that this must be done within 3 months of the date of the end of the tenancy.

Where there is a failure to pay the tenant’s deposit into the scheme, the tenant to make an application to court for recovery of THREE times the deposit amount as a form of compensation. Flexlaw is now dealing with such a claim on behalf of a client that is one of the first to be brought before the courts.

SafeDeposits Scotland, one of the authorised scheme providers, recently surveyed tenants and found that 76% were unaware of the requirement to place deposits into scheme protection. As more tenants become aware of their rights, landlords will need to sharpen their act as there is now just under two months for all deposits for privately rented properties to be secured in the scheme. Failure to do so may prove costly for landlords.

Secondly, each scheme requires to have a dispute resolution mechanism in place. If the tenant asks the administrator to refer the matter to dispute resolution, the administrator must do so if satisfied that all other attempts to resolve the matter have been exhausted – and the landlord must follow the resolution process. An independent adjudicator is appointed to consider the case and then provide a decision and must do so within 20 working days of receipt by the adjudicator of the referral. That decision can be reviewed but once done so, the adjudicator’s decision is final. The scheme administrator will then return the deposit to either the landlord or the tenant as decided in the adjudication.

The regulations are there to protect tenants and avoid the perception that private landlords may sometimes unfairly withhold deposits – for more information, whether you are a landlord or tenant, contact Claire Maguire Consultant Solicitor on 0141 404 6401 or Mark Harrison Managing Partner on 0131 202 6363.

Changes to the Late Payment of Commercial Debts legislation based on an EU Directive are now implemented in England. In Scotland similar regulations are due to come into effect on the 29th of this month and apply to commercial transactions entered into thereafter.

Of the Scottish changes, the following amendment is very interesting and relevant for debt recovery professionals and their clients –

“(2A) If the reasonable costs of the supplier in recovering the debt are not met by the fixed sum, the supplier shall also be entitled to a sum equivalent to the difference between the fixed sum and those costs.”

This refers to the currently fixed levels of statutory compensation of £40 – £100 depending on the size of the debt. From the 29th of this month and for contracts between commercial entities entered into after that date, there is the enticing prospect that “reasonable” recovery costs beyond these minima can be pursued.

For example, if a demand letter is being issued on behalf of a client, there would be no need to restrict the statutory compensation sought to eg £40 if the cost to the client of the solicitor issuing the letter was in excess of this. There is clearly now an opportunity to offer clients a “no net fee” service for commercial debt recovery (where recovery is successful of course).

The first caselaw will likely determine what is going to be regarded by the courts as “reasonable” – indeed it is possible that the Scottish and English courts will take different lines on this – but creditor clients should note that the landscape may soon become much more favourable for the recovery of costs.

It would appear that the changes to the legislation should impact on litigated actions as well. In many cases where the debt is small (particularly those below the £3000 Scottish small claim limit) there can be a marked gap between the awarded court expenses and the solicitor’s fees and outlays. If a recovery is made then sometimes the principal debt sum can get eaten into to bridge this gap. This discrepancy between the expenses awarded by the court and an often higher figure being the solicitor’s fee is always explained to clients but can be hard to digest. It will always, at the very least, leave a bad taste in the mouth. Coupled with uncertainty about recovery prospects full stop, this can be an added factor that persuades a client to write off a debt rather than sue to recover.

It is possible that this problem may disappear when these changes come into play. It will certainly be our firm’s default policy to make use of the new law to sue for a significant additional fixed sum to cover our clients’ “reasonable costs” in litigated cases once we start dealing with instructed debts flowing from post 29th March contracts.

Please feel free to contact Flexlaw Managing Partner Mark Harrison on 0131 202 6363 if you have any questions.

The SCS consultation poses serious questions for access to justice in the remoter Scottish courts slated for extinction. Will the courts really improve their generally low impact IT use to make up for the closure of physical court locations? Thats the least that justice demands. Even then such a policy will discrimate against older court users and the less IT literate.

Caselaw on credit hire of vehicles following road traffic accidents continues to evolve. In the recent case of ALEXANDER GREENLEES v ALLIANZ INSURANCE PLC – http://www.scotcourts.gov.uk/opinions/2011CSOH173.html - the defender argued for the dismissal of the whole claim on the basis that the driver had not acted reasonably in failing to read and understand the credit hire agreement. This argument failed in the Outer House of the Court of Session and charges were recovered. The case is a dense read but gives good guidance on how the courts are approaching these claims – here to curtail the number of days hire claimed to what was reasonable in the circumstances and then to average out rates when looking at the applicable “spot rate”.

In today’s economic climate it is vital for SMEs to keep tight control over their payment terms. The Department of Business Innovation and Skills (BIS) has a series of very useful downloadable guides available to assist – http://www.creditmanagement.org.uk/bisguides.htm

The guides provide advice to small businesses on cashflow, agreement of payment terms and gives tips for best practice. They strongly caution to set out and agree payment terms in advance and in writing.

We are equipped to advise clients on these matters to help minimise debts becoming bad. Of course, if your debt has gone bad, we can deploy a variety of methods to assist in its recovery.

One of the quirks of litigation has the ability to recover interest at a rate quite often much higher than the official base rate. This is because the usual default rate is the “judicial rate”, which has been fixed for many years in both the Court of Session and Sheriff Courts at 8%.

In the recent Court of Session case of FARSTAD SUPPLY AS v ENVIROCO LIMITED reported at http://www.scotcourts.gov.uk/opinions/2011CSOH153.html the judge noted the recent wide mismatch between the judicial rate and the base rate and made an adjustment for this by only allowing 4% interest from December 2008.

In damages cases this will be a useful authority for defenders to be aware of.

After a lot of hard work we have successfully transitioned the practice to our new “digital office” – Lawware’s cloud based practice management software LawCloud. Early impressions justify the investment in time and effort and we look forward to using this software to power Flexlaw’s continued expansion.

Flexlaw is in the final stage of its exciting transition to using Lawcloud to power it’s practice management system. Clients and contacts may notice a temporary break in email connectivity over the weekend from 2pm on Friday 8th July. Any contact with firm from this time until midday on Monday 11th July which is urgent should be made by telephone to the relevant fee-earner’s extension.

Our practice management software is at the heart of our firm. Last year we jumped to the cloud with our existing supplier. This summer, after an extensive review, we are moving to Lawware’s fantastic product Lawcloud.

This is a really exciting development for the firm and one which will form the basis for our continued expansion.

Follow Flexlaw founder solicitor Mark Harrison as he ventures into the brave new world of Twitter postings. I’ll attempt to keep these relevant to the law and opportunities for solicitors to join our practice. Currently, we are looking to recruit further experienced consultant solicitors to join our team, so if you have a core client following and fancy a move then get in touch