TDS spin-off to give profits to charity – but not just yet

The Scottish spin-off from the Tenancy Deposit Scheme, SafeDeposits Scotland, has announced that it will be a not-for-profit organisation that will give profits to charity.

In a statement, it said that surpluses would be gift-aided to its sister charity, SafeDeposits Scotland Trust, a grant-giving charity designed to promote education and best practice in the private rented sector in Scotland.

Unlike the TDS, which is an insurance-backed scheme to which agents and landlords pay subscriptions, the new scheme’s only source of funding is to be from interest rates.

But with interest on savings typically 2.63% and the best rate currently available being 3.17% from the Post Office, the scheme has admitted to LAT that it does not expect to start making any profits for at least two to three years.

Malcolm Lindo, SafeDeposits Scotland’s managing director, told us: “In fact, we can get better rates than the ones you have quoted, through our exchequer arrangements with the Royal Bank of Scotland.

“However, we do not expect to make any charitable donations for two or three years. In any case, our priority is going to be to repay the working capital loaned by the TDS.

“However, once interest rates go up, I am confident our scheme will be highly profitable.”

He said that the business plan was based on the scheme being able to capture one-third of the market – there are three tenancy deposit schemes in total that will be operating in Scotland from July 2, and all will be custodial schemes that will arrange for tenancy deposit money to be physically banked.

However, one great unknown is how large the private rented sector is in Scotland, and how many private landlords operate under the radar.

The second great concern is how many disputes will arise and need arbitration: when disputes rocketed in England and Wales, costs escalated to the extent that the TDS almost went under, and was only rescued by being able to raise its subscriptions.

However, SafeDeposits Scotland will not have this option, as all its running costs must be met from the interest paid on the pool of banked deposits.

Lindo was instrumental in setting up TDS in England and Wales and remains a non-executive director.

SafeDeposits Scotland is a joint venture between TDS, the Scottish Association of Landlords, RICS, NFoPP, Scottish Council for Voluntary Organisations and the National Union of Students Scotland.

www.Safedepositsscotland.com