New tenancy reform: What does it mean for landlords?

New tenancy reform: What does it mean for landlords?

By David Alexander, Managing Director

The residential rental sector in Scotland will, tomorrow, undergo its biggest and most significant change in almost 30 years.

From just after midnight, the Private Residential Tenancy Agreement (PRTA) will replace the Short Assured Tenancy, the latter introduced by the former Conservative Chancellor Nigel Lawson in 1988, and which is credited with having generated the huge rise in (and greater choice of) privately-rented accommodation over the past three decades.

The Short-Assured Tenancy, with a basic structure of six-month leases, dispensed with rent controls and made it easier for landlords to regain occupancy when and if required. The system has generally worked well and, having dealt with literally thousands of leases since its introduction, I have come across few landlords who have abused the law to the disadvantage of a responsible tenant.

Unfortunately, our touchy-feely politicians at Holyrood have chosen to listen more to politically-motivated pressure groups than the professionals in the rented sector and the Private Residential Tenancy Agreement is the result. This brings to an end time-determined residential leases – which have existed for hundreds of years – by providing absolute security of tenure for as long as tenants wish, while also giving them the right to vacate a property within as little as a month of signing a tenancy agreement. Landlords will only be allowed to regain control of their property if they wish to sell or refurbish it or move into it as their main or only home. Talk about “heads I win, tails you lose”!

A “no fault” clause also means a return to a costly and time-consuming legal process to have an anti-social or non-paying tenant evicted – much to the angst not just of the landlord but the tenant’s unfortunate neighbours.

Our political masters have failed (or chosen not) to realise that the vast majority of tenants already have the benefit of security of tenure. Anyone paying rent timeously and respecting the property will be positively wooed by his or her landlord through offers of long lease extensions and minimal (or even nil) rent increases. A desire or requirement to sell up is normally the only reason a landlord chooses not to retain a responsible tenant – and the latter can do that under the new rules.

Indeed, in some cases, the PRTA may actually diminish security of tenure. Let’s say that, from tomorrow, a single mother with a child moves into a property and a month later the landlord experiences some sort of financial crisis that requires him to sell up. Result? Mum – perhaps having just registered her child at school – will have to move out; under the old system she would have been protected for another 11 months, no matter the landlord’s wishes. Holyrood also seems to have been influenced by reports of “soaring rents” whereas averaged out over several years, increases have actually been quite modest.

Nevertheless, the legislation has paved the way for “rental pressure zones” in which rents can be controlled by the local authority, Edinburgh being an early candidate for an RPZ. These, one presumes, will have to be monitored, yet with tram debt, uncollected bins and potholed roads, can the city council really justify the employment of a team of “rent monitoring officers”?

Under this sub-system, any rent increases with an RPZ will be restricted to consumer price index plus 1 per cent. I strongly suspect annual rises will become the norm. Landlords and their agents will have no alternative but to work within the new regime but I fear we are about to experience more housing legislation that ignores the law of unintended consequences. Clearly, Holyrood has learned nothing from the unanticipated outcome of the Land and Buildings Transaction Tax, which has been so patently mis-structured that government income has actually undergone a significant reduction.

This article originally appeared in The Scotsman on 30 November 2017 titled 'If rental sector ain’t broke, why fix it?'