PRT changes not pretty reading for landlords

Does private rented sector legislation tip balance too much to tenants and will it lead to owners opting out, asks Lynn Simpson

Aprivate rented sector that provides good quality homes and high management standards, inspires consumer confidence, and encourages growth through attracting increased investment” was the Scottish Government’s vision for the private rented sector in their 2013 strategy.

Stemming from this, the private residential tenancy (PRT) created by the Private Housing (Tenancies) (Scotland) Act 2016 will replace the mechanism of assured and short assured tenancies, once the legislation comes into force.

This will overhaul the letting of private residential properties – but what does this new system change and will it contribute to the Government’s vision? Notable reforms to PRTS include the following: Removal of pre-tenancy notices – AT5 notice will be abolished; Simplification of notices on termination of tenancy – only one “notice to leave”; A model tenancy agreement, with mandatory and discretionary clauses, will be introduced; Landlords can only review rent payable once a year and must give a minimum three months’ notice of any increase; Scottish Ministers (on request by Local Authorities) can designate Rent Pressure Zones and cap increases in such zones; Landlords will no longer be able to recover possession merely because the initial term of the lease had expired.

The most notable, and possibly controversial, amendment is the removal of the “no fault” ground, which allowed landlords to recover possession of their property simply because the agreed duration of the lease had expired.

Under the new PRT regime, if a landlord wishes to remove the tenant, this must be done either by agreement with the tenant, or by establishing one of the 18 grounds specified in the Act. If the tenant will not vacate and no grounds for eviction apply, the landlord will be unable to recover possession, giving tenants increased security of tenure.

Some landlords will be unhappy with this restriction of their ability to remove tenants but might take solace from the range of eviction grounds in the legislation, which include where a landlord wants to sell or intends to live in the property, where the tenant has breached the tenancy agreement or been in rent arrears for more than three consecutive months.

Whilst the new regime will clearly provide benefits to tenants and landlords, albeit perhaps more in favour of tenants, the potential impact of these changes on the private rental market remains unclear.

There are already numerous obligations on landlords renting out residential property and many are affected by the introduction of the 3 per cent Additional Dwelling Supplement, payable (with some exceptions) on the purchase of additional residential properties under the Land and Buildings Transaction Tax regime.

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? Lynn Simpson is an Associate, Shepherd & Wedderburn.