Scotland: Important update for landlords
We are sure most landlords in Scotland will be aware that the biggest change to the lettings sector is almost upon us.
In this blog, we explain the most significant changes. The effect of failing to comply with this new legislation is onerous, so please do not hesitate to contact us to see how we can help you meet your obligations.
Private Residential Tenancies: Overview
The new Private Residential Tenancy (PRT) comes into force on 1st December 2017, replacing the current system of assured and short assured tenancies. Existing assured and short assured tenancies are unaffected by the changes.
Scottish Government has published a ‘model tenancy agreement’ (MTA) for landlords. Use of the MTA is optional, but if landlords choose not to use it, then certain statutory terms must appear in tenancy agreements. Northwood has ensured that our tenancy agreements meet these stringent requirements and offer additional protection though additional professionally drafted clauses.
Landlords must provide tenants with guidance whether they use MTA or not. There is no need for pre-tenancy notices such as the AT5 (notice that the tenancy is an assured tenancy), Tenant Information Pack or regarding the applicability of certain grounds for possession. However, landlords will still need to provide safety certificates and ensure properties meet the required standards etc.
As a PRT has no end date or duration, it can be terminated at any point from the start date, subject to relevant notice requirements, but landlords will have to rely on new grounds of possession. This process is very specific and the incorrect notice or grounds will prevent possession being obtained.
Initial rents are set by market forces, but rent can only be increased once a year from the start of the lease by giving tenants 3 months’ notice. Tenants will have 21 days to object. If they do, the matter will be determined by a rent officer who will set an “open market rent” for the property.
There are also provisions for Scottish Ministers to create Rent Pressure Zones (RPZ) to put further controls on rent increases within RPZs. RPZs can be created where rents are rising too fast, causing hardship to tenants and putting local authorities under pressure to provide housing or subsidise rents.
Tenants must give landlord at least 28 days’ notice, which surprisingly can be given at any time after the PRT starts.
Landlords can only end a PRT using one or more of the new 18 grounds for possession. As before, some of these are mandatory and some are discretionary and two are mixed grounds. We strongly recommend you seek professional advice before seeking possession and are happy to advise on this process.
To end the tenancy, the landlord must issue the tenant with what is called a “Notice To Leave” (NTL), detailing which of the grounds apply and providing relevant evidence.
Where the tenant has been entitled to occupy the property for 6 months or less at the time notices are served, the Notice period for all grounds is 28 days. Certain grounds, such as rent arrears will always have a notice period of 28days regardless of how long the tenant has been in the property. Otherwise, the period of notice will be 84 days.
If the tenant doesn’t leave property when the NTL expires, the landlord must apply to the new First-tier Tribunal: Housing & Property Chamber (HPC) to have the tenant evicted. Applications to HPC are free, and parties can represent themselves. If the ground is a mandatory one then the tribunal has to issue eviction order if the ground is established. With discretionary grounds, not only do the grounds need to be established, but granting the eviction order also has to be reasonable in the circumstances.
Many letting agents in Scotland operate in a professional manner, complying with voluntary codes of practice and ensuring high quality levels of service for the landlords and tenants they assist. Such good practice is not shared by all and some landlords and tenants can be subject to poor standards of service and, in some cases, illegal practices by some letting agents.
In response to these issues, the Housing (Scotland) Act 2014 introduces a framework for the regulation of letting agents in Scotland. This includes:
a mandatory register of letting agents with an associated ‘fit and proper’ person test and training requirement that must be met to be admitted to the register;
a statutory code of practice all letting agents must follow;
a new way for tenants and landlords to resolve complaints against letting agents for breaches of the statutory code of practice through a new specialist First-tier Tribunal; and
powers for Scottish Ministers to obtain information and of inspection to support monitoring of compliance.
Once implemented, these measures will help increase the overall standards of service and professionalism within the letting industry and provide customers (tenants and landlords including former tenants and landlords) with an effective way to challenge bad practice. Northwood welcomes the drive to ensure all agents work to the same standards that we expect from our teams.
We appreciate that these changes may be of concern to some landlords, however Northwood has had time to fully consider and prepare for implementation. Not only have our teams already undertaken the mandatory training, but we have had the benefit of the best legal advice available and are confident we can ease the burden of this far reaching change to the private rented sector.
Please do not hesitate to contact your local office for professional advice without obligation.