The first tenancy deposit scheme to be approved is the Letting Protection Service Scotland.
The scheme also aims to protect the reputation of the majority of private rented sector landlords who act professionally and responsibly.
Once in place landlords or their agents must pay deposits to an approved scheme and provide key information about the tenancy, the deposit, and the scheme which is protecting it, to the tenant.
The scheme will be free for landlords and letting agents to participate in and will provide access to a free and independent dispute resolution service, where agreement over the return of a deposit cannot be agreed by the tenant and landlord.
Two further schemes are being considered with the intention of starting all three schemes, which will operate across Scotland from July 2, 2012. In order to provide landlords time to prepare, the legal requirements to submit deposits into a scheme will come into effect from November this year.
Brown said: "Up to 11,000 tenants annually have £3.6million of their deposits wrongly withheld, which is why this Government is taking action to ensure tenants receive a fair deal.
"It is important to stress that the majority of landlords act responsibly. This scheme is aimed at those landlords who continue to tarnish the image of the private rented sector.
"The new regulations that allow the scheme to operate are also deliberately streamlined with the emphasis on creating a cost effective approach to safeguarding tenancy deposits."
Kevin Firth, Director of The LPS Scotland said: "With five years of custodial deposit protection experience under our belts, we are delighted to be approved by the Scottish Government to operate a scheme in Scotland. I encourage landlords and tenants to make sure that they understand the legislation and take appropriate action to ensure they are covered.
"It will be compulsory for landlords and letting agents in Scotland to protect their deposits with a Government-approved scheme as soon as the legislation launches. It is crucial that those in the private rented sector don’t fall foul of this legislation and take the appropriate steps to ensure that they are prepared for its introduction."
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