Real Estate Alert
Regulations have been published confirming that the new form of Scottish residential tenancy (known as the "private residential tenancy" (or "PRT")) will be introduced on 1 December 2017, being the date on which the main provisions of the Private Housing (Tenancies) (Scotland) Act 2016 ("2016 Act") comes into force. The PRT regime replaces the current "assured tenancies" regime, which was introduced by the Housing (Scotland) Act 1988 ("1988 Act"). It will not be possible to enter into a new assured tenancy on or after 1 December 2017.
Main features of the new tenancy regime
The table below provides a comparison between PRTs and assured tenancies. The key features of the new PRT regime can be summarised as follows:
- The PRT will be an open-ended tenancy. Landlords will only be able to recover possession of their property using one of 18 specified grounds for repossession. Some of the 18 grounds do not feature in the list of grounds for repossession specified under the 1988 Act for the current assured tenancy regime
- The “no-fault" ground for repossession available in relation to short assured tenancies (“SATs”) (currently by far the most commonly encountered form of Scottish residential tenancy) will not be available for PRTs. (Although it will not be possible to enter into an assured tenancy on or after 1 December 2017, an assured tenancy which was entered into before that date will not come to an end automatically and will continue to be governed by the 1988 Act, including the 1988 Act's provisions relating to termination of tenancies.)
- In PRTs there will be no minimum initial term of the tenancy during which the parties are bound. The Bill which preceded the 2016 Act proposed a minimum six-month initial period for PRTs, but this provision was removed during the Bill's passage through the Scottish Parliament
- A tenant can bring a PRT to an end on giving 28 days' notice in writing at any time after the tenancy commences. After the tenancy has commenced, it is open to the parties to agree in writing to alter the 28-day notice period
- The period of notice that a landlord is required to give to a tenant to terminate a PRT is 28 days (where the tenant has been entitled to occupy the property for not more than six months), or 84 days (where the tenant has been entitled to occupy the property for more than six months). In certain circumstances (such as where the tenant has engaged in antisocial behaviour, or where the tenant has been in rent arrears for three or more consecutive months) 28 days' notice is required, regardless of how long the tenant has been entitled to occupy the property
- Under the 2016 Act, if the tenant does not leave the property after being given notice by the landlord, the landlord will have to seek repossession through the First Tier Tribunal (‘FTT"). The FTT will decide on the merits of each case
- A tenant will have recourse to the FTT if they believe their tenancy has been wrongfully terminated
- No pre-tenancy notices will be required for PRTs and the 2016 Act introduces streamlined and less complex notice procedures to end the tenancy
- PRT landlords will only be able to increase rents once in every 12-month period and only with three months’ notice. If a tenant considers that any proposed rent increase would take their rent beyond rents charged for comparable properties in the area, they will be able to refer the increase for adjudication to a Rent Officer at Rent Service Scotland
- Local authorities will be able to apply to Scottish Ministers to approve rent a pressure zone (or zones) covering all or parts of its area. If an area is designed as a rent pressure zone, rent increases for sitting tenants under PRTs are limited for up to five years, though landlords will still be able to increase rents by a minimum of CPI +1 percent
- The 2016 Act lists certain types of lettings which are exempt and cannot be PRTs. This is similar to the list of types of lettings which cannot be assured tenancies under the 1988 Act. Although exempt tenancy types (such as, for example, student accommodation provided by further and higher education institutions) will not be governed by the 2016 Act (and will therefore not be subject to the 2016 Act’s provisions relating to matters such as tenancy duration and notice periods), such tenancies will still be regulated to some extent under legislation relating to matters such as accommodation standards, licensing of landlords, houses in multiple occupation, and rent deposit schemes
- Lettings within qualifying purpose-built student accommodation (“PBSA”) built by private accommodation providers is a category of exempt letting which is not exempt under the 1988 Act but will be exempt under the 2016 Act. To qualify for the PBSA exemption the student accommodation in question must include at least 30 bedrooms in the same building or complex
- A Recommended Model Tenancy Agreement ("MTA") has been published in draft for consultation by the Scottish Government. The finalised version is expected in early October. The MTA itself is not mandatory but it does contain mandatory and discretionary clauses and a statutory guidance note. The landlord and tenant can elect to enter into the lease electronically
The Private Housing (Tenancies) (Scotland) Act 2016 is available here.
Detailed guidance on the new PRT regime is available on the Scottish Government website.
Table: Key features of residential tenancies created under The Housing (Scotland) Act 1988 v the new private residential tenancy introduced under the Private Housing (Tenancies) (Scotland) Act 2016*
|Subject||1988 Act||2016 Act|
|Tenancy framework||Assured tenancies created under the Housing (Scotland) Act 1988. A short assured tenancy (“SAT”) is the most common form of assured tenancy. SATs are popular among landlords as, provided certain procedures are complied with, a landlord can recover possession of the property at the end of the tenancy without having to establish grounds for doing so.||A single Scottish “private residential tenancy” ("PRT"). PRTs can be entered into on or after the commencement date of the main parts of the 2016 Act, which has been announced as 1 December 2017. From that date onwards, it will not be possible to enter into an assured tenancy. (N.B. An assured tenancy which was entered into before 1 December will not come to an end automatically and will continue to be governed by the 1988 Act, including the 1988 Act's provisions relating to termination of tenancies.)|
|Tenancies covered||The 1988 Act states that a residential tenancy is an assured tenancy unless it is a tenancy listed in Schedule 4 to the Act. The list in Schedule 4 includes lettings by Universities or Colleges direct to students, lettings of social housing, and holiday lettings.||Under the 2016 Act, a residential tenancy is a private residential tenancy unless it is a tenancy listed in Schedule 1 to the 2016 Act. The list in Schedule 1 includes lettings by Universities or Colleges direct to students, lettings within purpose-built student accommodation with 30 or more bedrooms, lettings of social housing, and holiday lettings.|
|Length of tenancy||The minimum period of a SAT is 6 months. There is no minimum period for an assured tenancy that is not a SAT.|| |
There is no minimum initial tenancy period during which either or both parties are bound. The tenancy is an "open-ended" tenancy.
The tenant can bring the tenancy to an end by giving 28 days (or such other period as is agreed between the parties) notice to the landlord at any time after the tenancy commences.
The landlord can only bring the tenancy to an end if one or more of the eviction grounds listed in Schedule 3 to the 2016 Act exists.
N.B. In the Bill which preceded the 2016 Act there was a minimum initial period of 6 months in which both parties would be bound, but this provision was removed during passage of Bill. The Scottish Property Federation, in their response to an October 2016 Scottish Government consultation on the new tenancy (available here) argued that the inclusion of the 28-day tenant notice has "perhaps inadvertently led to a presumption of a 28-day tenancy and it is suggested that this is proving difficult for the purposes of attracting funding for the sector". The SPF went on to state that they were firmly of the view that a compelling case can be made to support the exemption of largescale build to rent from the Act. To date, this suggestion has not been implemented.
|Tenancy roll-over arrangements||Tenancies can roll over on a monthly basis after the initial lease period expires if this is provided for in the lease. A lease may also be extended by tacit relocation (silent renewal) on a year-to-year basis (where the original term was for more than a year) or for the same period as the original term (where this was less than a year).||The tenancy will continue indefinitely until it is ended by the tenant or landlord.|
|Repossession by landlord|| |
Under a SAT, landlords can reclaim their property simply because the fixed term has ended (subject to notice periods and providing the appropriate procedures are followed). This is known as the 'no-fault' ground for repossession.
If the tenancy has been brought to an end, and the tenant does not leave the property, the landlord has to obtain a court order to evict the tenant.
PRTs do not have a no-fault ground for repossession. The landlord must use a specified eviction ground.
If the tenant does not leave the property after being given notice by the landlord, the landlord will need to apply to the First Tier Tribunal ("FTT") to evict the tenant.
|Grounds for repossession||In addition to the no-fault ground for repossession for SATs, there are 17 grounds under which a landlord may seek eviction of a tenant under the 1988 Act. About half of these are mandatory i.e. the court must give a possession order if the ground is proved. The rest are discretionary. All need a Sheriff court order.|| |
There are 18 grounds for repossession under which a landlord may seek eviction.
Eight of the grounds are mandatory, which means that if the FTT is satisfied that the ground exists, it must issue an eviction order. Of the remaining ten grounds, two have a mandatory and a discretionary strand and eight grounds are discretionary. For the discretionary grounds, if the FTT is satisfied that the ground exists, it will still have discretion on whether to issue an eviction order.
|Notices terminating tenancy – Landlords|| |
To bring a tenancy to an end, the landlord must give the tenant a Notice to Quit of the period stated in the lease. This is subject to a minimum required period of 40 days (for leases exceeding 4 months) or whichever is the longer of one third the duration of the lease or 28 days (for leases which do not exceed 4 months). (N.B. These notice periods also apply to "common law tenancies" such as lets by Universities direct to students, which are excluded from both the 1988 and 2016 Act regimes.**)
In the case of a SAT a notice under section 33 of the 1988 Act must also be served at least 2 months (or such longer period as is set out in the lease) prior to expiry.
A Notice of Proceedings is the length of notice required before a landlord can take legal proceedings. It is either two weeks or two months, depending on the ground being used.
A single Notice to Leave will replace the Notice to Quit and Notice of Proceedings required for tenancies regulated under the 1988 Act. The Notice to Leave will set out the reason why the landlord wants the tenancy to end and will also notify the tenant that a case can be referred to the FTT for eviction proceedings if they do not leave the property.
Landlords will have to give tenants the following notice to leave: The tenant has been entitled to occupy the property for not more than six months = 28 days' notice (4 weeks) The tenant has been entitled to occupy the property for more than six months = 84 days' notice (12 weeks)
|Landlords - Shorter Notice periods in certain circumstances||No current provisions|| |
In certain circumstances, the landlord can give the tenant 28 days to leave regardless of how long the tenant has lived in the property. The circumstances are:
|Notices terminating tenancy –Tenants||The tenant is contractually obliged to occupy the premises for the duration of the term of the lease. Tenants must give landlords Notice to Quit of the period stated in the lease. This is subject to a minimum required period of 40 days (for leases exceeding 4 months) or whichever is the longer of one third the duration of the lease or 28 days (for leases which do not exceed 4 months). (N.B. These notice periods also apply to "common law tenancies".)|| |
Section 49(3) of the 2016 Act sets out the minimum notice a tenant must give a landlord. It is whatever period the parties agree or, if they do not agree a period, it is 28 days.
Section 49(4) of the 2016 Act provides that any agreement between the parties as to the notice period must be in writing and cannot be made before the tenancy becomes a private residential tenancy.
This flexibility to agree different notice periods does not apply when the landlord is seeking to end the tenancy.
|Pre-tenancy notices||Landlords must give advance notice to tenants if they intend to use some of the repossession grounds under Schedule 5 to the 1988 Act.||Pre-tenancy notices are not required for PRTs.|
|Rent Reviews|| |
Short assured tenants can refer rental level to the FTT to have a market rent fixed. This can be done during the contractual period of the lease.
In assured tenancies the rent cannot be referred to the FTT until the contractual period of the tenancy (including any continuation on tacit relocation) has ended and the tenancy has converted (if applicable) to a "statutory assured tenancy".
Rent may not be increased more than once in any twelve month period.
The landlord serves a "rent-increase notice" on the tenant under section 22 of the 2016 Act. The minimum notice period for a rent increase that must be given by the landlord is three months or whatever longer period has been agreed between the landlord and tenant.
|Rent Increases|| |
Short assured tenants can apply to the FTT to make a determination on their rent.
The FTT can set a market rent for a property where they consider that there are enough similar houses in the area let on assured tenancies to draw comparisons and that the rent is significantly higher than other rents in the area.
Assured tenants can also make applications to the FTT, in certain circumstances.
There are no provisions for rent pressure zones.
The tenant can refer the increase for adjudication to a rent officer at Rent Service Scotland.
The rent officer has the power to determine, in an order, an “open-market” rent. Appeals against rent officer decisions can be made by either party to the FTT.
Where rents for sitting tenants are rising excessively, local authorities may apply to Scottish Ministers to have an area to be designated as a “rent pressure zone”. This would mean landlords could not increase rents for sitting tenants above a specified percent set by Ministers. Any limit set would be at least CPI + 1 percent. Scottish Ministers would have to bring forward regulations to designate a particular area as a rent pressure zone.
|Model tenancy agreement||No prescribed tenancy agreement (although the Scottish Government website refers visitors to its private residential lettings web pages to a style SAT agreement published by the City of Edinburgh Council).|| |
A Recommended Model Tenancy Agreement ("MTA") will be published by the Scottish Government.
The MTA itself will not be mandatory but it will contain mandatory and discretionary clauses and a statutory guidance note.
*The table above is based on a comparison table included in a Scottish Parliament Information Centre briefing on the Private Housing (Tenancies) (Scotland) Bill published on the Scottish Parliament website on 28 October 2015.
**The expression "common law tenancy" is used here to refer to a private residential tenancy which is not governed by the 1988 Act or 2016 Act regimes, which means that the rights and obligations of the parties will largely be determined by the terms of the lease, and any implied terms at common law. Common law tenants (such as students who let property direct from a University or College) do not have statutory security of tenure, but do have a right to remain in occupation for the duration of the lease. Common law tenants also have certain statutory rights relating to repairs and habitability of the property, and to a minimum period of notice to quit. For leases of more than four months, the minimum period is 40 days, and for leases of four months or less, the period of notice is one-third of the duration of the let (subject to a statutory minimum of four weeks). In addition, common law residential tenants (as well as other residential occupiers, such as occupiers under licences to occupy) have protection against unlawful eviction and harassment (under the Rent (Scotland) Act 1984 and the 1988 Act) and cannot be evicted without court proceedings.