Implications For Landlords of the New Private Residential Tenancy.
Our previous blog covered the key points of the new Private Residential Tenancy (PRT), due to come into effect in December 2017. In this blog we take a look at how the new tenancy will affect landlords, as well as some potential pitfalls.
Possible concerns for landlords include: -
Remember, it will no longer be possible for a landlord to end a tenancy after expiry of a fixed term. Unless one of the mandatory repossession grounds applies, only a tenant will be able to end a tenancy. So, in practice a tenancy will run without any end date until the tenant chooses to end it. This shouldn’t worry responsible landlords who take a business-like approach to letting. Provided the tenant is complying with the terms of the tenancy they shouldn’t have any need to terminate other than for one of the reasons allowed for in the grounds. But what if the tenant is causing problems?
Anti-social behaviour - There is a discretionary ground for possession if the tenant or a guest of the tenant is engaging in anti-social behaviour. At present, with a short assured tenancy, there’s no need to refer to this if you want to end the tenancy. Provided the contractual term has finished, the tenancy can be terminated without reason simply because its term has expired. Under the new system however landlords will need to convince the Tribunal that eviction is justified. This will mean gathering and presenting reliable evidence and trying to persuade (probably reluctant) neighbours to testify, and there’s no guarantee that possession will be awarded. The Tribunal will need to be convinced that eviction is reasonable under all the circumstances.
Rent arrears –There’s a ground for repossession if a tenant has been in rent arrears for three consecutive months and, if the tenant still owes at least a month's rent by the first day of the Tribunal hearing, the ground is mandatory and the Tribunal must issue an eviction order. However, the Tribunal must also be satisfied that the arrears were not due to a delay or failure in the payment of a relevant benefit. So, it will be possible for a defaulting tenant to escape mandatory eviction by simply reducing the debt to under a month’s rent, in which case the Tribunal has discretion and will need to be satisfied that eviction is reasonable.
Rent Increases – These will be restricted to one increase a year and there will be a right of appeal to the Rent Officer. The difficulty with this is that rents for identical properties can vary considerably depending on standard of fit-out and other factors, but the Rent Officer tends to take a two-dimensional view based on number of bedrooms.
Rent Pressure Zones – Local authorities will be able to apply to the Scottish Ministers to designate all or part of an area as a Rent Pressure Zone (RPZ). In an RPZ rent increases on existing PRTs would be restricted in line with inflation + 1%. It is expected that RPZ applications will arise only where rents are increasing strongly. However this takes little account of the fact that robustly rising rents are usually a symptom of supply failing to meet local demand and experience has shown that compulsorily constraining a rising market can further diminish supply if landlords opt for alternative investments.
It’s also worth mentioning succession rights - If the tenant dies and if certain conditions are met, partners of the late tenant, family members aged 16 and over and resident carers may succeed to the tenancy.
The new statutory notice period should a landlord wish to end a tenancy (which can be done only if one of the grounds applies, remember) is 84 days, or 28 days if the tenancy has been running for less than 6 months. Should a tenant wish to bring the tenancy to an end then the notice period is 28 days, so it's possible (unlikley probably bit still possible) for your tenant to serve notice just after moving in, giving rise to a new set of marketing costs just after you've paid the bill for the first round.
What do landlords need to do?
Know the rules. You must have a clear understanding of the rights and responsibilities of landlords and tenants in Scotland and abide by them.
Use the new model tenancy agreement after the effective date. Although this is mandatory, additional property-specific clauses can be added provided they are lawful and don’t conflict with the model clauses.
Tenant selection is going to be key. Landlords will therefore need to either acquire skills in sifting applicants and then use a professional and comprehensive referencing agent, or else use the services of a reliable professional letting agent with a proven track record. Otherwise they may run into difficulties.
This summary is just that, and there’s lots more we won’t bore you with here. Get in touch if you have any questions or, if you have the resolve to wade through all the detail, the Act itself can be accessed here.