The Scottish Government have recently published the Private Housing (Tenancies) Bill providing an overview of the proposed developments in a sector where the need for more regulation has been inevitable for some time. The proposed changes are intended to provide tenants with ‘greater security and stability in their home and community’ as well as providing reassurance to Landlords that their Tenants will treat their property as a long-term home rather than somewhere temporary. It is also likely to be the case that the Private Rented Sector in Scotland will see the Bill replace short assured tenancy and assured tenancy for all future lets.
The proposals set out in the Bill include:-
- Legislation which will prevent a Tenant from being asked to leave their home simply because the tenancy has reached its end date
- A more streamlined system with simplified pre-tenancy notices, modernised grounds for repossession and comprehensive tenancy agreements
- The limitation of rent increase to only once per year and a compulsory three months notice period to provide tenants with advance notice to allow them to budget accordingly
- The introduction of powers to Local Authorities to implements rent controls in areas where there are excessive increases in rents and there is concern about the impact on the tenants and the wider housing system
- Modernising the grounds for landlord repossession
- More progressive repossession grounds for rent arrears cases as well as new provisions for cases where the landlord wants to sell the property or where the tenant has abandoned the property.
One of the most contentious issues arising from the Bill, particularly in relation to landlords and investors is the proposed rent control measures. The prominent concern is that they could harm investor confidence and drive landlords out of the market. Scotland may appear less attractive for investment purposes in comparison to the rest of the UK. This in turn could discourage construction resulting in less residential properties at higher prices. However, despite such views, the modernisation of the rental regime in the private sector is aimed to increase standards, protect tenants and ultimately create a balanced relationship between the landlord and the tenant. The following provides a breakdown of the proposed rent controls:-
- Rent predictability: Rent increases can take place no more than once in any twelve month period. Furthermore, all landlords will be required to give their tenants at least twelve weeks’ notice of any change in rent.
- Protection against rent increases: A tenant will now be able to refer any rent increase for adjudication to a rent officer at Rent Services Scotland if they consider the proposed increase would take their rent above the rent charged for comparable properties within the area.
- Rent Capping: The Scottish Ministers will be provided with the power to cap levels of rent increases for sitting tenants in areas where rents are rising excessively. The local authority would be required to apply to the Scottish Ministers for the specified area to be designated as a ‘rent pressure zone.’ Sufficient evidence must be provided to the Scottish Ministers who can thereafter make the decision on whether to cap the rent of rate increases for a limited period of time. This period of time cannot exceed five years. There is an understanding that there is a need to safeguard the interests of responsible landlords within contested areas, therefore, the Ministers must ensure that they take into account inflation and other reasonable costs as well as consulting tenants, landlords and other relevant stakeholders before any such designation.
Another significant aim of the Bill is to provide reassurance to the landlords that their tenants will treat their property as a long term home. This is of course favourable to landlords who are fortunate to have good Tenants. It is generally perceived that the longer the lease the better the investment value for the landlord and now with the possibility of annual rent rises, there is reduced risk of rents becoming stagnant. The Bill also introduces what would effectively be a ‘tenant-only break’ which would mean that the residential lease now has the potential to run in perpetuity. However, questions have been raised as the where this leaves the Scots law rule that a residential lease cannot run for more than twenty years. There are at present, inconsistencies in the Private Housing (Tenancies) Bill, where a residential lease could theoretically last for longer than twenty years although only at the instance of the tenant.
It should also be noted that the proposed security of tenure could lead to issues arising in the student accommodation renting model and for the student housing operator. The norm in this particular sector would be for the student housing operator to rent the property during the academic term. This is done so on the presumption that the tenancy will terminate at the end of term, in order to allow for summer lets; or at the end of the academic year which would allow for an influx of new lettings. At present, such student lets are not exempt from the new rules on security of tenure. This would therefore restrict the student operator from advertising the properties for a new term as there is no guarantee that they would be vacant. On this basis, it is apparent that the new Bill could potentially be detrimental to the previously well functioning student accommodation model.
As with any new proposed legislation there are inevitable areas of uncertainty and concern. The Consultation period aims to work through those issues raised in the hope that when the Bill passes through parliament; it will be the biggest step forward in private tenancy law in the last quarter of a century.
Please note that this article is for general information only. Nothing in this article should be taken as legal advice. Should you require any further information with regard to private tenancy law, contact our litigation team on 0141 221 1919.