New ways of improving tenancy deposit practice are under consideration by the Scottish Government.

A recent study into Scotland's private rented sector revealed that a significant minority of tenancy deposits appear to be withheld, whether legitimately or not.

Options and costs for establishing an Alternative Dispute Resolution scheme, including the possibility of establishing a Tenancy Deposit Scheme to deal with tenancy deposits, are to be finalised by this summer.

This will include using existing or new dispute resolution schemes, either on a voluntary basis or by means of a legal requirement on landlords, expanding the role of the Private Rented Housing Panel, which currently adjudicates on complaints from tenants that landlords are failing to comply with the Repairing Standard.

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Another option is dispute resolution as part of a tenancy deposit protection scheme, similar to schemes operating in England and Wales.

Proposals will be presented for views to an expert group representing tenants, landlords and agents.

Housing and Communities Minister Alex Neil said: "Landlords can legitimately withhold a tenant's deposit for a number of reasons.

"However, this Government shares the concerns about unfairly withheld tenancy deposits and I want to move quickly to resolve this issue. We will present the evidence to an expert group with the aim of reaching a consensus on the most appropriate action to take.

"If consensus is not possible, we will publish an options paper by the autumn for wider public consultation, with a view to making a final decision in early 2010."

As part of the recently published Review of the Private Rented Sector, the Scottish Government collected evidence on the scale and nature of unfairly withheld tenancy deposits.

The review found that the amount of wrongly withheld tenancy deposits may be between £2.2m and £3.6m per annum, due to between 8,000 and 11,000 tenants. That equates to between 3.4% and 7.4% of all tenants.

Resolving disputes on whether or not a landlord was legitimate in withholding all or part of a tenancy deposit is important in helping both landlords and tenants manage arrangements when a tenancy comes to an end.

(GK/JM)