Private Housing (Tenancies) (Scotland) Bill

by Mark Alexander

10:04 AM, 5th November 2015
About 3 years ago

Private Housing (Tenancies) (Scotland) Bill

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Private Housing (Tenancies) (Scotland) Bill

This IMPORTANT article is not only applicable to landlords in Scotland, it could also be a glimpse into future regulation to follow in England and Wales. Private Housing (Tenancies) (Scotland) Bill

The Bill was released around three weeks ago and is still being poured over by lawyers and advisers. Before it becomes an Act in Scotland there will be some changes but the basic fundamentals will stay the same.

Given the complexity and gravity of the changes Property118 strongly recommends that all landlords who own property in Scotland should become a member of the Scottish Association of Landlords. My own personal opinion is that becoming a member of SAL is without a doubt the most cost effective way for landlords with property in Scotland to keep abreast of the changes in legislation and to receive quality information. Details of how to become a member of SAL can be found at the bottom of this article.

I must thank Scottish Association of Landlords for organising and inviting me to their National Landlords Day earlier this week.

Thank you also to Andrew Cowan of TC Young Solicitors for his excellent presentation which summarised the key details of the Bill.

So what is so important?

The fundamental change proposed in the Bill is that tenants will have security of tenure under a new compulsory form of model tenancy agreement to be known as a PRT which is an abbreviation for Private Residential Tenancy.

Here’s a list of the key points:-

  1. Landlords will no longer be able to evict without grounds.
  2. Illegal to charge fees to tenants (this is already the case in Scotland)
  3. Landlords pays a penalty of up to three months rent if a correctly formatted tenancy is not issued within 28 days
  4. Minimum 3 months notice to increase rent (can only be applied once a year)
  5. Tenant can appeal rent with a rent officer and then to a tribunal
  6. Scottish Ministers can introduce Rent Pressure Zones “RPZ’s” which will enable them to cap rent at CPI + 1% plus a discretionary number. It is not known whether that discretionary number can be a negative.
  7. Tenants can end a tenancy by giving 28 days notice within the first six months and 56 days notice thereafter

The grounds for eviction will be:-

During the initial period of tenancy 28 days notice is required but grounds are restricted to:
  • lender intends to sell property
  • breach of tenancy agreement
  • tenant has been in rent arrears for 3 or more consecutive months
  • tenant has a relevant conviction
  • tenant has engaged in antisocial behaviour
After initial period of tenancy there are additional grounds for serving notice (minimum 84 days) including:
  • landlord intends to sell property or to refurbish property
  • landlord or family intends to live in property
  • landlord intends to use property for non residential purpose
  • tenant not occupying property
  • tenant has materially failed to comply with a statutory term of tenancy (Mandatory)
  • tenant has failed to comply with a non statutory term of tenancy (Discretionary)
  • 3 or more consecutive months rent arrears and at any point during that period at least one month’s rent is due (Mandatory)
  • 3 or more consecutive months rent arrears (Discretionary)

My personal thoughts are that the changes will discourage investment into the Scottish Private Rented Sector. It will be interesting to see how lenders react, but the Bill does seem to have considered them at least. One thing is for sure, Scottish landlords will need to get far better at due diligence before agreeing to let their properties. Can you imagine having to prove to a Judge that a tenant is terrorising neighbours. Would the neighbours give evidence? I suspect the cost of rent guarantee and legal fees insurance will increase in Scotland to compensate for the increased risks too.

The one positive is that there appears to be a willingness from the powers that be in Scotland to improve the speed of the system to deal with evictions. Is this just political claptrap or will we see some actual proposals? It’s a pity the detail on that point is nowhere near as comprehensive as the detail in the Bill isn’t is?

What are your thoughts?

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Comments

Dr Rosalind Beck

14:24 PM, 5th November 2015
About 3 years ago

My initial response is that I don't like the 3-month rental refund/penalty if the tenancy is not correctly 'formatted.' What does that mean? One little line missing off the bottom of a page and it's a 3-month fine! Christ. They just love fining landlords, don't they?
And also the fact that a tenant can go an extra month into arrears compared to now - so we end up being owed more.
The best way to deal with it is to be super-careful with what tenants one accepts in the future - so the riskier tenants can go and look elsewhere and the councils, housing organisations and certain MPs (like Siobhain McDonagh) can forget trying to persuade us to take on these riskier people just so that they can later sneer at us as they support that tenant in their non-paying behaviour. They hate us but they also want to use us when it suits them. Well they can forget that.

Rod Adams

15:12 PM, 5th November 2015
About 3 years ago

'7. Tenants can end a tenancy by giving 28 days notice within the first six months and 56 days notice thereafter'

Does this mean that even though a tenant signs up to a 12 month lease they can give 28 days notice to leave at any stage within the first 6 months? If so I find that very concerning!

Mike W

15:29 PM, 5th November 2015
About 3 years ago

This is really bad legislation. It effectively means that the tenant decides when to leave. There are no fixed term leases. Nothing wrong with that?

Ability to plan saves money and reduces rents.

Think of the student market. It works on a 12 month cycle. Many groups of students change after a year. Some medics get assigned to hospitals in other towns and move out. Language students go overseas for a year. What are the rules for joint leases? An individual cannot give notice on the lease, all tenants have to do so. Do students remember when to give notice? No. I usually (as do most student landlords) have a fixed term 12 mo lease. I discuss with the tenants whether they wish to stay on. If they do I issue a new 12 mo lease (usually with no rent increase). If they do not I advertise and get new tenants for a 12 mo fixed term. The checking process and reference process takes about 6-8 weeks. I go through the renewal/new tenant process at Easter. If that process is delayed then there will be voids. Currently I have little or no voids. If my void increases then so do my rents. My management costs go up and so do my rents. Not good for tenants. Do legislators have brains?

In the past I have had the discussion with students who just want a 9 mo lease. No problem. As I cannot lease the property for 3 months then you can have it a rent of £X*12/9 where £X is the 12 mo rent. The discussion is not very frequent. Most students work 12 mo per year to pay for uni.

I have stated this in the 'consultation' process.

This kind of silliness was last introduced in the UK in the 1970s. Even working for a FT100 company with a rental package did not help. In London the landlords only were prepared to rent to foreigners on the argument that it was reasonable to presume that the foreigner, after his assignment finished, would leave, whereas the UK national might not.

Rod Adams

9:42 AM, 6th November 2015
About 3 years ago

Reply to the comment left by "Rod Adams" at "05/11/2015 - 15:12":

Having now read the actual bill it looks like the summary posted above is a mis-interpretation. The tenant can give 28 days notice within the first 6 months but only if the initial period of the tenancy has expired. So if the initial period was 6 months, the earliest they could give notice is 6 months - 28 days. If the initial period is greater than 6 months they have to give 56 days notice. Which is pretty much where I am with the lease I use currently.

Si G

10:50 AM, 6th November 2015
About 3 years ago

Complete waste of time more red tape costs for tenants will rise industry should be self regulated if you want to rent deal with a landlord you trust, if tenant seems dodgy get three months deposit at start, if very dodgy six months, never needed to reference waste of time tenant produces photo id, utility and council tax bill or no let, no need to make things complicated is there. Another piece of nonsense is the dps unnecessary.

Rod Adams

11:24 AM, 6th November 2015
About 3 years ago

Reply to the comment left by "Simon " at "06/11/2015 - 10:50":

I actually think its a fairly well balanced piece of legislation which gives reasonable rights to both landlords and tenants. I'm not sure there will be any additional overhead in terms of administration over what is already in place in Scotland. Granted this would be a significant change over the English system which, lets face it, hasn't moved on much since the Dark Ages!

One area of concern I did have was the rent setting element, however having read it, it may not be the issue I thought. The setting element is only for increases in rent, not the rent for the initial period. It also allows for 'Rent Pressure Zones' where the increases would be limited to CPI + 1 + a defined number (which cannot be negative). I suspect this will lead to a de-facto standard that rents increase by CPI + 1 annually even where there is no Rent Pressure Zone. Seems reasonable to me and less scope for tenants to challenge this as it is defined in the legislation.

Graham Chilvers

16:26 PM, 7th November 2015
About 3 years ago

This is the 1977 rent act all over again. I have been a Landlord since 1986. I remember the 1977 act patently better than most politicians. The two key points of the 1977 rent act where, you couldn't get your property back just because you wanted it and the Rent Officer told you what rent to charge. It seemed a Magic formula in 1977 for the government. Low rents and protected tenancies, but it soon started to unwind. No one was stupid to offer a resonable standard vacant property and create a new tenancy. The returns were so low when by chance you had a vacant property, you sold it. The result was the massive decline in rental property. Tenants were so desperate for somewhere to live they accepted low standards. Landlords refused to maintain the properties because of the low returns and in the hope their tenants would leave the damp dump so they could sell it. I brought a block of flats in poor condition very cheap. I left it in a poor condition. I hated advertising a vacancy, I would get a 100 desperate people on the phone. I have been a Landlord for 30 years. I truly think the era of being a Landlord is over. It is turning full circle back to the dark days. It will take the government 5/10 years to learn again the lesson of the 1977 rent act which they changed with the 1988 Act. What they learnt was, you can’t force by legislation, lots of low cost Rental Accommodation of a high standard when the UK property market is to expensive to offer the that possiablity. Landlords and rental properties are like mercury in the palm of your hand. Close your fingers around them and squeeze them hard. Open your hand and there all but gone.

Graham Chilvers

16:35 PM, 7th November 2015
About 3 years ago

Reply to the comment left by "Rod Adams" at "06/11/2015 - 11:24":

I have been through the era of Rent Officers telling me what I can charge and protected tenancies. With respect, you have no idea how to me, naive you comments. What are you going to do when your tenant has a party every weekend. Take them to court? They will say they are sorry and the Judge will cancel your eviction. The tenants will then have a party to celebrate. In the meantime the Rent Officer (paid by the government) will half the rent your tenants have to pay and you can no longer evict them. It is a nightmare on Elm Street. I wish I had your rose colour glasses, hindsite to them away.

Rod Adams

23:20 PM, 7th November 2015
About 3 years ago

Reply to the comment left by "Graham Chilvers" at "07/11/2015 - 16:35":

Graham, have you actually read the proposed legislation?

Rod Adams

23:20 PM, 7th November 2015
About 3 years ago

Reply to the comment left by "Graham Chilvers" at "07/11/2015 - 16:35":

Graham, have you actually read the proposed legislation?


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