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A one size fits all private rented sector that promises too much will not help tenants

The new Private Housing (Tenancies) (Scotland) Bill, or just private tenancies bill, which is due to go before parliament early next year proposes far-reaching changes applied universally via a single prescribed tenancy agreement. The Scottish Government have also outlined the following objectives for Private Rented Sector (PRS) housing in Scotland:

  • improved security for tenants
  • safeguards for landlords, investors and lenders
  • good quality homes
  • high management standards
  • strong consumer confidence
  • growth through increased investment
  • a new and simplified system
  • better property management
  • more clarity for tenants and landlords
  • better tenant and landlord understanding of the tenancy agreement
  • increased ability for tenants to assert their rights without fear of eviction
  • increased public sector investment in affordable homes

 

​An ambitious PRS framework for the future is a good thing, however a Bill that places shackles on the PRS will damage the interests of tenants in real terms and not help to advance the above objectives.

Key problems with the Bill are:

(a) Removing landlords ability to set a tenancy end date combined with a one size fits all approach.

(b) Insufficient landlord benefits.

Removing landlords ability to set a tenancy end date combined with a one size fits all approach:

If you take the time to read the bill you will reasonably conclude that it seeks to increase tenant occupancy rights as much as possible without entirely capsizing the boat. Security of tenure is of course very important in some cases, however the Bill is overly focused on this issue in relation to the challenges facing the sector as a whole. You will also reasonably conclude that it will not deliver a simplified system. A new and simplified system is a stated objective of the Bill and one which has the potential to free up resources and focus effort where it is most needed. The Bill proposes that a landlord's ability to set a tenancy end date is replaced by 16 new eviction grounds, all of which are subject to the approval of a new PRS Tribunal. The widely used AT5 Notice which precedes a Scottish Short Assured Tenancy currently says:

A LANDLORD OF A SHORT ASSURED TENANCY HAS SPECIAL RIGHTS TO REPOSSESS THE HOUSE.  IF THE LANDLORD TERMINATES THE TENANCY BY ISSUING A VALID NOTICE TO QUIT AND GIVES THE TENANT AT LEAST 2 MONTHS NOTICE (OR LONGER PERIOD IF THE TENANCY AGREEMENT PROVIDES) OF HIS INTENTION TO REPOSSESS THE HOUSE THE COURT MUST GRANT THE LANDLORD AN ORDER ALLOWING HIM TO EVICT THE TENANT IF HE APPLIES FOR ONE AT THE END OF THE TENANCY PERIOD SET OUT IN THE TENANCY AGREEMENT.

If this is replaced with 16 new eviction grounds, all of which are subject to the approval of the new tribunal, then it is extremely hard to see how a simplified system will result. 

Today's PRS in Scotland is extremely broad and diverse. Mobile professionals, families with children, lower income households and students from all corners of the globe by nature have very different requirements. The new Bill makes no allowance for diversity and proposes that a single prescribed tenancy agreement is applied universally.

Quite apart from how the new Bill is received by landlords when it is fully understood, if landlords are no longer allowed to apply a tenancy end date (without exception), PRS availability will be dictated by new supply and existing tenants giving notice. This market restriction will have a sivere effect on students and holiday accommodation in particular. Students moving into the private rented sector from home, purpose build student housing (PBSH) or university halls will lose the ability to find and secure accommodation reasonably in advance of when it is actually required, and landlords who plan ahead to release suitable accommodation for festival and holiday use (commonly let to highly mobile students and professionals for the rest of the year) will quite simply no longer be able to do so.

Insufficient landlord benefits:

Some may see insufficient landlord benefits as a good thing and their voices have been loud and active during the debate. Ultimately however they are not accompanied by helpful tenant solutions and their agenda is often more political than pragmatic.

The combination of the removal of the tenancy end date (referred to in the Bill as the no-fault ground to give the impression of unreasonable landlord action) + the insistence on a single prescribed tenancy agreement + recent UK Government tax changes which significantly increase the financial heat on private landlords, all add up to a very much less attractive investment proposition.

If the Bill progresses as planned the PRS risks lurching up-market as landlords become highly selective and require tenants to jump through additional application hoops. They may also choose to serve notice before new rules apply. Without compensating incentives (especially aimed at encouraging landlords to invest in more challenging areas of the PRS) landlords will exit the sector because ownership benefits and control are reduced to a level that they find unacceptable.

Above all else, the Bill must deliver more choice and a better deal for tenants. Presently it fails to do that. 

 

Ewan Foreman
MD - 1LET

 

 

Picture courtesy of Hudson Valley News Network