Countdown to PRS changes in Scotland

The Scottish government has announced the country’s biggest changes to the sector for over 25 years, with the first major initiatives kicking in on December 1st.

What are the major changes?

There are complete changes to tenancy agreements- impacting possessions, rent increases and fixed terms, an remodel of the PRS court system and as of 2018 a complete overhaul of letting agent regulations. Nothing too scary!

The tenancy agreement is a fairly major change!

Yes, effective as of December 1st, all landlords and letting agents will have to move from the SAT agreement (similar to the AST elsewhere in the UK) to the new PRT system, although existing tenancies won’t be impacted by the legislation.

How will the tenancy agreement change impact me as a landlord?

There are a couple of significant changes within the tenancy agreement overhaul. These are:

No fixed terms

All tenancies will be indefinite until ended by the tenant with 28 days’ notice, or by the landlord relying on one of the 18 grounds for repossession. Theses grounds are:

Mandatory grounds

• The landlord intends to sell the let property for market value within three months of the tenant ceasing to occupy it.
• Let property to be sold by the mortgage lender.
• The landlord intends to refurbish and this will entail significantly disruptive works to, or in relation to, the let property.
• The landlord intends to live in the let property as his or her only or principal home.
• The landlord intends to use the let property for a purpose other than providing a person with a home.
• The let property is held for a person engaged in the work of a religious denomination as a residence from which the duties of such a person are to be performed; the let property has previously been used for that purpose; and the let property is required for that purpose.
• The tenant is not occupying the let property as his or her only or principal home or has abandoned the let property.
• After the start date of the tenancy, the tenant is convicted of using, or allowing the use of, the let property for an immoral or illegal purpose, or is convicted of an imprisonable offence committed in or in the locality of the let property. The application must usually be made within 12 months of the tenant’s conviction.

Discretionary grounds

• A member of the landlord’s family intends to live in the let property as his or her only or principal home.
• The tenancy was entered into on account of the tenant having an assessed need for community care and the tenant has since been assessed as no longer having such need.
• The tenant has breached the tenancy agreement – this excludes the payment of rent.
• The tenant has acted in an antisocial manner to another person and the Tribunal is satisfied that it is reasonable to issue an eviction order given the nature of the behaviour and who it was in relation to or where it occurred. The application must usually be made within 12 months of the antisocial behaviour occurring.
• The tenant is associating in the let property with a person who has a relevant conviction or who has engaged in relevant antisocial behaviour. A relevant conviction is a conviction which, if it was the tenant’s, would entitle the Tribunal to issue an eviction order. Relevant antisocial behaviour means behaviour which, if engaged in by the tenant, would entitle the Tribunal to issue an eviction order. The application must usually be made within 12 months of the conviction or antisocial behaviour.
• Landlord registration has been refused or revoked by a local authority.
• House in Multiple Occupation (HMO) license revoked by the local authority.
• Overcrowding statutory notice in respect of the let property has been served on the landlord.

Eviction grounds with both a mandatory and a discretionary strand

• The tenant is in rent arrears. (This ground is mandatory if, for three or more months, the tenant has been continuously in arrears of rent and on the day the Tribunal considers the case, the arrears are at least one month’s rent. The Tribunal must also be satisfied that the arrears are not due to a delay or failure in the payment of a relevant benefit. This ground is discretionary if the tenant has been in arrears of rent for three or more months, and on the first day the Tribunal considers the case, the arrears are less than one month’s rent and the Tribunal is satisfied that it is reasonable on this basis to issue an eviction order. In deciding whether it is reasonable to evict, the Tribunal will consider whether the tenant being in arrears is due to a delay or failure in the payment of a relevant benefit.)
• The tenancy was granted to an employee and the tenant is no longer an employee. (This ground is mandatory if the application for eviction was made within 12 months of the tenant ceasing to be - or failing to become - an employee and discretionary if the application is made after the 12 month period has elapsed.)

Different terms for possession

There’s no section 21 for a no-fault possession procedure, the landlord can only apply for possession if one or more of the 18 above points is relevant

The amount of notice a landlord must give the tenant will depend on which eviction ground is being used by the landlord and how long the tenant has lived in the property.

The landlord must give the tenant at least 28 days’ notice if, on the day the tenant receives the notice to leave, the tenant has occupied the property for six months or less, or if the eviction ground (or grounds) is that the tenant:

• the tenant is not occupying the property as his or her only or principal home
• has breached the tenancy agreement
• is in rent arrears for three or more consecutive months
• has a relevant criminal conviction
• has engaged in relevant antisocial behaviour
• has associated with a person who has a relevant conviction or has engaged in antisocial behaviour.

The landlord must give the tenant at least 84 days’ notice if, on the date the tenant receives the notice to leave, the tenant has been living in the property for over six months and the Notice to Leave does not rely exclusively on one (or more) of the above eviction grounds

Rent increases

Rent can only be increase once in a twelve-month period, and a landlord must give a tenant three months’ notice before such an increase takes place.

In order to increase the rent, the landlord must provide the tenant with a ‘Rent Increase Notice’. The tenant, within 21 days of receiving the notice, can refer the increase for adjudication to a rent officer. If the tenant wishes to do this, they must complete part 3 of the form and return it to the landlord to give them notification of their intention to make a referral to a rent officer. If the tenant fails to return part 3 of the form to their landlord, the rent increase will go ahead as initially proposed in the notice.

The only exception to the rent increase changes is within the Rent Pressure Zones. The tenant is unable to refer the increase to a rent officer as Scottish Ministers have set a cap on the maximum amount that rent can be increased.

For more information on the changes, you can read a full copy of the new Scottish Model Tenancy here.

And what about the court system? I don’t intend using it, but still!

Oh yes!

As if a complete overhaul of possessions, rent increases, terms and tenancy agreements wasn’t enough, the Scottish Government are launching another housing change on December 1st!

The First-tier Tribunal for Scotland (Housing and Property Chamber) will take over the management of all civil cases relating to the private rented sector, which is currently managed by the sheriff courts. Criminal cases will remain with the sheriff courts.

The First-tier Tribunal for Scotland (Housing and Property Chamber) will also hear cases relating to new tenancies, and the upcoming letting agent’s regime (more on that in a moment!)

The Chamber already manages rent, repair and landlord’s right of entry issues within private sector housing, so it’s not a huge departure, however by bringing everything under one roof, the system should be more streamlined.

And dare I ask, next year…?

When you’re on a roll, why stop eh?

With a remodel of the PRS firmly underway, the Scottish government are planning to turn the spotlight on letting agents in 2018, and they aren’t doing things by halves!

Early next year, plans have been announced to kick off the regulation of lettings agents, by rolling out:

• Mandatory registration requirements: Letting agents will be required to be admitted to the letting agents register. In order to pass muster, they must prove that they are ‘fit and proper’ to undertake the required work, and meet minimum training requirements. Agents need to be registered by 30th September 2018, with the register opening early next year.
• Set a Statutory code of practice: Coming into force on 31st January 2018, the letting agents code of practice sets out the standards that all agents must meet, and will give tenants and landlords the power to challenge agents who aren’t meeting the service levels that they should.
• First-tier Tribunal for Scotland (Housing and Property Chamber) redress scheme: If the code of practice is breached, landlords, tenants and Scottish Ministers will have the power to take the issue to the First-tier Tribunal for Scotland (Housing and Property Chamber), which will have the power to issue an enforcement order, detailing the steps and agent must take in order to rectify the issue.

Will these changes stay in just Scotland?

It’s unlikely. Scotland has always been a leader in the PRS, setting new standards and blazing the trail with new legislation. The tenant fee ban and Rent Pressure Zones are two highly publicised pieces of Scottish legislation that are now looking to make their way into England and Wales.