It's expected that the Bill might become law in Spring 2016, but we don't yet know when the new rules will be brought into force.
The headline grabbing changes are the removal of the automatic right for a landlord to end a residential lease at the fixed end date and the possibility of Government imposed rent controls in high rent areas - but there's a lot more to the Bill than that.
Once the Bill is enacted, the key changes will be:
- Open ended tenancies - which will continue indefinitely after the initial duration, until terminated by notice from the landlord on one of the prescribed grounds or notice from the tenant.
- Landlord no longer has right to terminate just because the duration set out in the tenancy has ended.
- Minimum initial duration 6 months - but the prospective landlord and tenant can fix a shorter or longer initial duration.
- New compulsory clauses and no notices require to be served by landlord before tenancy begins.
- Rents cannot be increased more than once per year - and tenant has a right to challenge if he considers that the proposed new rent is above market rate.
- Rent controls can be imposed by the Scottish Ministers on certain areas, at the request of a local authority - if rents in those areas are so high that the local authority is coming under increasing pressure to provide housing or to subsidise the cost of housing.
In the rest of this article I provide more information on some of these changes and comment on how the Bill relates to student accommodation.
Open ended tenancies and how they can be terminated
Neither landlord nor tenant will be able to get out of a PRT until the initial duration has ended except that:
- the landlord can terminate earlier if the tenant is in breach, has a relevant criminal conviction or is involved in anti social behaviour; and
- its mortgage holder can terminate earlier if it intends to sell the property following default by the landlord on the mortgage.
Otherwise a PRT can be terminated on any date after the expiry of the initial duration - by notice from the tenant (simply because it wishes to leave) or notice from the landlord (on one of the prescribed grounds).
A tenant must give 8 weeks notice (or only 4 if the PRT has only run for 6 months or less).
A landlord must give 12 weeks notice (or only 4 if the PRT has run for 6 months or less). The landlord period also drops to 4 weeks if the ground for termination is that the tenant is not occupying, the tenant is in material breach or behaving anti socially or the tenant gets a relevant criminal conviction.
Grounds for landlord termination
Unlike under the current system, a landlord will not be entitled to end a PRT simply because the lease period set out in it (usually 6 months or 12 months) has expired.
Instead a landlord can terminate on any one or more of up to 16 grounds which include:
- the landlord intending to sell or carry out major refurbishment;
- the landlord wanting the property to occupy himself or as a home for a member of his family or to use for non residential purposes;
- tenant breach or anti social behaviour or failing to occupy the property;
- if the property let was linked to the tenant's employment, that employment has ended; or
- if the property is purpose built student accommodation, the tenant is no longer a student.
Some of the grounds, including landlord sale or major refurbishment, lender sale and tenant material breach are mandatory - such that the First-tier Tribunal has no discretion and must grant an eviction order.
Rent increases will be limited to one per year, of which at least 3 months' notice must be given to the tenant.
A tenant can refer any proposed increase to a rent officer, if he thinks that the rise is above market rate. If either landlord or tenant does not agree with the rent officer's decision, they can appeal it to the First-tier Tribunal.
Rent controls in rent pressure zones
Local authorities can ask the Scottish Ministers to impose a cap on rents in the whole or part of their area - if rents are rising, causing hardship to tenants and as a consequence the authority is coming under pressure to provide housing or to subsidise the cost of housing.
- would not cap at below a rate equal to the rise in the Consumer Price Index plus 1%;
- could only be applied for a maximum of 5 years; and
- would not apply to the initial rent fixed under any new PRT - but only to rent increases once a PRT is in place.
The Bill applies to most accommodation that is let to students - except any that is let direct by a university or other educational establishment. So it does apply to those who rent their flats out to students and to commercial student accommodation providers.
There is an extra ground for landlord termination which can be used by commercial student accommodation providers - if the planning permission for the construction or conversion of their development was given on the basis that the accommodation was to be used exclusively for housing students. For those properties, the landlord has the right to terminate if the tenant is no longer a student and is not intending again to become a student within the next 3 months.
The Scottish Government appreciates that the inability to ensure that students' leases end at the expiry of the initial duration could result in a loss of income or longer void periods for commercial student accommodation providers. One of the circumstances considered was where a tenant has left it late in the summer to serve notice to end his lease, so that the provider then missed out on the period of highest demand for accommodation.
In the Explanatory Notes to the Bill it is suggested that it may be possible to mitigate such loss of income by a combination of a change of approach to management and effective communication with the student tenants so that their intentions are known. In practice, most students will leave at the end of the duration set out in their lease.
It is also anticipated that the cost of managing purpose built student accommodation might increase - due to the need for additional communication with the students, to try to establish their intentions and adjusting systems to be able to deal with differing end dates for the lettings.
We shall keep you updated with any significant changes as the Bill progresses through the Scottish Parliament.