Last week the third and final stage of The Private Housing (Tenancies) (Scotland) Bill was passed by the Scottish Parliament, confirming that the private residential tenancy will be a reality in 2018. Regardless of the many contrasting opinions on the Bill everyone involved in the private rented sector (PRS) in Scotland – from tenants and landlords, to letting agents and local councils – will be affected by the changes that it will bring.
The primary aim of the Bill, according to the Scottish Government, is to replace the current private lettings regime in Scotland with a modernised and streamlined structure. The key changes for the PRS, and the affect that it will have on both landlords and tenants, are outlined below:
One tenancy document
One of the main outcomes of The Private Housing (Tenancies) (Scotland) Bill is that the Short Assured Tenancy, as is currently used, will be replaced by the Private Residential Tenancy (PRT) and it will encompass a single tenancy document. This streamlined document will contain prescribed clauses, meaning that the process will be both simplified and uniform across the industry. The introduction of the private residential tenancy will also mean the end of potentially confusing pre tenancy documents such as the AT5.
The paperwork required to end a tenancy will also be simplified – all that will be issued is a ‘notice to leave’.
Outcome for landlords: A much more straightforward process for drawing up tenancy agreements. Having a single document will eliminate the complication of signing pre tenancy documents in the correct order. Many landlords currently fall foul of existing legislation and end up with Assured rather than Short Assured Tenancies by completing the paperwork incorrectly.
Outcome for tenants: Tenancy agreements will be easier to understand and be (mainly) uniform across the industry.
New grounds for repossession
Landlords will need a reason to end a tenancy as the ‘no fault’ ground will no longer exist. A PRT can only be ended by the landlord if one of the 18 grounds for possession applies. The prescribed grounds for a landlord to end a tenancy will be extended to include grounds such as moving in themselves or selling, providing increased security for repossession.
There will also be a specific ground for possession of abandoned properties which can be used to give 28 days’ notice to leave.
Outcome for landlords: Landlords will have increased grounds for repossession, but will have to have a reason for doing so under the prescribed grounds.
Outcome for tenants: Tenants will have more security and can only be asked to leave if the landlord has a valid reason.
No initial term for tenancies
Tenancies will no longer have an initial term, moving away from the initial 6-month term of the Short Assured Tenancy, meaning that tenants will be able to serve notice at any point to leave the property. Tenancies will then run from day to day until either party serves the appropriate notice.
Landlords will be required to give 28 days’ notice if the tenancy has run for 6 months or less, and 84 days’ notice if longer than 6 months. Tenants will be required to give only 28 days’ notice to end a tenancy.
Outcome for landlords: Landlords will no longer have the security of a fixed term tenancy, meaning that they are also vulnerable to increased void periods and potentially higher costs if tenants leave sooner.
Outcome for tenants: Tenants will no longer be tied to 6 month tenancies, and will have a longer notice period if their landlord ends a long term tenancy providing more stability for them and their family.
Increased control on rent reviews
Rents can still be reviewed, and annual increases are permitted, however tenants must be given three months’ notice of any increase. This will make rent increases more predictable for tenants whilst still giving landlords the opportunity to keep their rental income in line with market value. However, tenants can apply to the new First-tier Tribunal if they believe their rent has been increased beyond market levels. In addition, councils will have new powers to set rent pressure zones if rents are perceived to be rising too fast in a specific area. If approved by Scottish Government ministers, rent levels would be capped in the area for a predetermined amount of time.
Outcome for landlords: Rents are not being restricted on new lets, only the frequency of increases on existing tenancies, so landlords still have the opportunity to keep their rents in line with market values.
Outcome for tenants: Tenants will have more predictable rent increases; they can also dispute increases but this is no different to the rights that tenants currently have.
The full details of The Private Housing (Tenancies) (Scotland) Bill can be viewed here