Scotland:

The new private residential tenancy (PRT) in Scotland under the Private Housing (Tenancies) (Scotland) Act 2016 will replace the existing private tenancy which was based on the English model of the assured and short assured tenancy, in place since 1988. Once the new legislation comes into force landlords, agents and tenants will be governed by the new regime.

The Scottish Government’s vision, and one which inspired the change says:

“A private rented sector that provides good quality homes and high management standards, inspires consumer confidence, and encourages growth through attracting increased investment”

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These are big changes and obviously represent some risk to the Scottish private rented sector (PRS) after nearly 30 years of an old regime which stood the test of time, so will the changes bring about the Scottish Government’s vision?

What are the changes? Here are the salient points:

  • Removal of the AT5 pre-tenancy notice – this notice is to be abolished
  • The termination of a tenancy notice is to be simplified in that only one notice, a ‘notice to leave’ is required
  • A new model tenancy agreement provided by the Government, which includes both mandatory and discretionary clauses, is to be introduced
  • Landlords will be restricted in the number of times they can review rents: they will be able to review rents just once a year, which must be preceded by a minimum three months’ notice
  • The Government is to designate “Rent Pressure Zones”, capping rent increases where Ministers deem demand is exceeding supply and pushing up rents too high.
  • The no fault possession process (similar to the English Section 21 process) will no longer apply and landlords will not be able to recover possession just because they want to for their own reasons or the initial fixed-term tenancy ends.

Clearly, this latter point is the most controversial out of the pack, and worries landlords and agents the most.  The ‘no fault’ ground has been the mainstay of the industry for so long, and many in the industry see this as a crucial element in a landlord’s protection when this go horribly wrong with a tenancy.

Under the new regime, removing tenants from a tenancy must be either by agreement with the tenant, or by proving one of 18 grounds specified in the new Act. If the tenant refuses to leave and none of the 18 grounds apply, or when the landlords is unable to prove one of the grounds satisfactorily to the court, then he or she will be unable to recover possession.

This turns the original concept of the assured shorthold tenancy on its head, removing a system that many landlords saw as an encouragement to landlords letting; peace of mind that meant to them that if all else fails they are in a position to recover possession.

Although the grounds allowing re-possession are quite extensive, including where landlords want to sell or intend to live in the property themselves, where a tenant has breached the tenancy agreement, such as causing damage or they are in rent arrears for more than three months, sometimes proving such a breach can be complicated, long drawn out in court, and therefore expensive.

It is likely to be perceived in the eyes of private landlords that the new Act will benefit tenants far more than themselves, providing as seems the intention, more security for the tenant.

The consequences of total security of tenure and rent control are well known and well documented, both in England under the old Rent Acts and elsewhere. Whilst the new Scottish system does not go as far as that, it is a big bold step in that direction.

The overall impact of these legal changes will remain unclear for some time, but coming on top of numerous other constraints on letting in the UK, including some swinging tax changes, and increased regulation, all the signs are that most landlords will view these as negative and a discouragement to make rental properties available. This result would mean just two things: fewer rental properties and higher rents.

Writing for The Scotsman newspaper, Lynn Simpson, an Associate at the legal firm Shepherd & Wedderburn asks:

“Will further restrictions, particularly on a landlord’s ability to remove tenants once the purported duration of the lease has expired, simply encourage some private landlords to sell their property rather than risk the perceived loss of control under the new regime? Or will the changes simply discourage people from becoming private landlords in the first place?” 

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