Scottish Rental Reforms Impacting on Letting Sector

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Tenancy Reforms:

A new survey finds that landlords’ rental property sales, only moths after the introduction of major tenancy law reforms in Scotland, have outpaced purchases by five to one.

A National Landlords Association (NLA) survey shows that over the last three months almost a quarter (24%) of landlords with properties in Scotland have sold, but only 5% have purchased new properties.

The data relates to property transactions between April and June this year, starting just four months after the Scottish Private Residential Tenancy was introduced last December.

The figures could represent a dramatic turnaround in the buy-to-let landscape in Scotland, which, if the trend continues, could significantly affect the supply of rental accommodation in Scotland.

The new Scottish tenancy, according to the Scottish government, “provides security, stability and predictability for tenants and appropriate safeguards for landlords, lenders and investors.� However, the NLA and other landlord bodies have voiced their concerns that landlords will leave the sector if the new legislation is perceived to increase their letting risk and monetary returns.

The NLA’s chief executive officer, Richard Lambert, goes as far as to say that “up to 45,000 landlords or approximately 67,000 rental properties could be negatively affected by the changes.�

“The Scottish Private Residential Tenancy system removes the flexibility of the sector to meet the varied needs of an ever changing population of renters, in particular students and those who only seek short term tenancies, such as during the Edinburgh Festival.

“Because student landlords now have to provide indefinite tenancies, they won’t be able to advertise their properties for the Festival, as they won’t know for certain if they will be free and available by the end of July. If this sets a trend, and artists struggle to find short term accommodation, the 2018 Edinburgh Festival could be the last to offer such a variety of talent.

“The last quarter has seen the highest proportion of landlords selling properties in Scotland in any three month period since the Government first announced their tenancy reforms in 2016.

“We warned these changes would unnerve investors in private rented homes in Scotland, and it should serve as a clear sign of what to expect if similar reforms are introduced elsewhere in the UK,� added Mr Lambert.

The increased level of divestment in the Scottish private rented sector should be concerning for the Scottish Government, Mr Lambert says. The NLA is suggesting that the UK government pay close attention to the Scottish PRS and its new tenancy laws before embarking on any changes in England and Wales, in particular its ongoing consultations about a 3-year compulsory tenancy.

What are the Scottish Reforms?

• Tenancies don’t have any end date, so tenancy contracts run indefinitely unless the tenant gives notice or the landlord applies to a property tribunal to use one of 18 new “grounds for evictionâ€�.
• If a tenant has lived in a property for longer than six months, landlords now have to give 84 days’ notice to leave the property. Tenants wishing to leave of their own accord need to give 28 days’ notice.
• Rent increases are limited to no more than one every 12 months. If a tenant is unhappy about the amount of their rent increase they can refer the matter to a “rent officerâ€�, part of the Scottish Government’s Rent Service Scotland.
• Scottish local authorities are now able to apply to the government to cap increases in areas (rent pressure zones) where they deem rents to be rising too quickly.
• A property tribunal now oversees disputes between landlords and tenants in Scotland, including issues such as being misled into moving out, or if their documentation about their rights and the terms of their agreement is inadequate.
• The eviction process is simplified using 18 grounds for possession and landlords are now able to apply to the tribunal if their tenant refuses to leave after an eviction “notice to leaveâ€� has been issued.
• A new model tenancy agreement, a modernised standard version, is provided by the Scottish Government, which includes standard clauses that landlords can edit to suit their circumstances.
• A standard “notice to leaveâ€� form is now in use in Scotland to end a tenancy.

Have your say about the proposed changes to tenancies in England – Open Consultation until 26th of August – “Overcoming the Barriers to Longer Tenancies in the Private Rented Sector� – see here

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