Changes to the private rented sector as of 1 Dec 2017
The Scottish Government has confirmed that a new form of Scottish residential tenancy known as the private residential tenancy (“PRT”) will come into force on 1 Dec 2017 when the main provisions of the Private Housing (Tenancies) (Scotland) Act 2016 (the “Act”) take effect. The Act applies to any new private rented sector tenancy from 1 Dec 2017.
This means that from 1 Dec 2017 it will not be possible to enter into new assured tenancies such as short assured tenancies which are currently the most popular form of tenancy in Scotland. However, under the Act existing assured tenancies (including short assured tenancies) are not affected and will continue until they are terminated by either party in accordance with the terms of the assured tenancy agreement. Certain classes of lets including holiday lets, social/police/military housing and student accommodation which qualifies as Purpose Built Student Accommodation (PBSA) or is provided by an academic institution are not subject to the new tenancy regime. Therefore, universities, colleges and PBSA providers can continue to offer fixed-term lets to students.
The headline feature of the PRT is that, unlike assured tenancies, the landlord will no longer have the right to terminate the tenancy at a fixed end date i.e. the “no-fault" ground for repossession is abolished. Instead the tenancy will carry on until either the tenant terminates the tenancy or the landlord recovers possession under one of the 18 grounds specified in the Act. There will be no fixed minimum term under the PRT, unlike short assured tenancies which have a minimum term of 6 months. A tenant will be able to bring a PRT to an end on 28 days' notice at any time (the parties can agree to adjust this notice period after the tenancy starts). The landlord must give 4 weeks notice to evict if the tenancy is within its first 6 months or, after that, 12 weeks notice to evict. If the tenant disputes the ground of eviction, the landlord will have to seek eviction through the new First Tier Tribunal (“FTT”) which has been set up to adjudicate on disputes.
The landlord must now have grounds for evicting the tenant. As with the current short assured tenancy regime, the 18 grounds of eviction are a mix of mandatory grounds, where eviction must be granted by the FTT if the ground is proved, and discretionary grounds where the FTT will only grant eviction if it finds it is reasonable to do so. Grounds for eviction include: the landlord intends to put the property up for sale or refurbish the property to the extent it is not practical for the tenant to occupy it; the landlord wants to use the property for a non-residential purpose; the landlord or a family member of the landlord intends to live in the property; the tenant is carrying on criminal or anti-social behaviour at or in the vicinity of the property; and the tenant has breached the tenancy agreement.
Landlords can seek an increase in rent by issuing a rent increase notice to the tenant but cannot increase the rent more than once in any 12 month period. If the tenant thinks the proposed rent increase is unreasonable they can refer the matter to a rent officer to determine open market rent whose decision can be appealed to the FTT. The possibility of statutory control of rent now exists in Scotland as local authorities can apply to the Scottish Government to designate an area as a “rent pressure zone” which, if so designated, means rent increases can be no greater than a percentage set by the Scottish Government for a period of up to 5 years. Landlords within a rent pressure zone will however still be able to increase rents by a minimum of Consumer Prices Index + 1per cent. Edinburgh City Council has already discussed implementing rent controls under the Act in order to control rent increases in the city.
The Act introduces a Model Tenancy Agreement (“MTA”) with the aim of introducing consistency of practice across the private rented sector. The MTA was published in draft for consultation by the Scottish Government. The consultation period has ended and the final version of the MTA is expected next month. The MTA will contain mandatory and discretionary clauses and a statutory guidance note. It is expected that the landlord and tenant will be able enter into the MTA electronically, if they wish.
Landlords should begin preparations for the new regime now including ensuring that their standard lease documents are fit for purpose.
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