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Introduction to the Bill

The Private Housing (Tenancies) (Scotland) Bill (herein referred to as “the Bill”) was introduced to the Scottish Parliament on the 7th October 2015 with the stated aim of providing a clearer and simpler tenancy regime for the modern private rented sector. This will be facilitated by the introduction of the private residential tenancy which will replace the existing assured tenancy and short assured tenancy. The new tenancy seeks to strengthen the position of tenants whilst providing apposite safeguards for landlords in the sector. The Infrastructure and Capital Investment Committee is the lead committee for the bill and met on 10th February 2016 as part of the stage 2 process. This bulletin will highlight some of the key features of the bill and particularly some of the stage 2 amendments.

The Private Residential Tenancy

The new tenancy will be the instrument utilised for all future private residential sector (PRS) lets.

Initial Period

When introduced to parliament in October the proposed tenancy was due to have an initial period of 6 months during which the grounds for ending the tenancy were very restricted. The aim was to provide some assurance to landlords that they would not be subject to a series of short term lets of less than 6 months as this may significantly increase the difficulty of managing properties as well as increasing the potential amount of time that a property is unused.

A number of concerns were raised, during the stage 1 process, about the potential harm that the initial period might cause. One particularly important concern was if someone was to enter into an arrangement and then find themselves the victim of an abusive relationship. This may put financial pressure on the victim to stay in a home in which they are at risk. Further examples were forwarded in the stage 2 debate; a tenant having entered into a tenancy in good faith could suddenly find that they have to move quickly, perhaps to provide care and support to a family member living elsewhere, or to accept a new job or indeed move as part of their current job. Margaret Burgess (the Minister for Housing and Welfare) stated that “these sorts of reasons have persuaded me that the initial tenancy could prove unreasonably restrictive and inflexible for tenants. The same is true for landlords; they might offer a tenancy in good faith and then find that they need the property urgently and unexpectedly to house a member of their family or they are suddenly required to sell it”.

Due to the arguments above, the initial 6 month term was removed and now the tenancy can be brought to an end only by the stipulation of the tenant or by the landlord serving notice to leave and thereafter applying to the First tier tribunal to make an eviction order. It should be noted that it is possible for a tenant to serve notice and the landlord can choose to waive the required notice period if he so chooses. Therefore it is possible to bring a tenancy to an end very quickly if it is instigated by the tenant and agreed by the landlord.

The default notice period (at stage 1 of the bill) to be given by tenants to landlords when ending a private residential tenancy was set at 28 days when the tenancy has lasted 6 months or less and 56 days when the tenancy has lasted for 6 months or more. The original intention was that tenants who have been in a property for longer would be required to give a longer notice period likewise landlords are required to give tenants longer notice period when the tenant has been in the tenancy for longer than 6 months except where the eviction is due to the tenants conduct.

Due to an amendment proposed by Patrick Harvie MSP, which was agreed to at stage 2, the notice period for a tenant serving notice is now 28 days no matter the length of time the tenancy has run.

Repossession of the Property

The Scottish Government deliberately left out the no-fault ground for repossession. Under the current short assured tenancy scheme the no-fault ground for repossession simply refers to the fact that the tenancy contains a set termination date and on that date it can be repossessed, subject to notice, by the landlord. One of the main reasons for getting rid of the no-fault ground is that it would allow the setting of a termination date at the outset of the tenancy which is highly likely to put the landlord in an unfair bargaining position. Essentially, leaving out the no fault ground creates a more secure tenancy for the tenant.

The tenancy can come to an end if the landlord serves a notice to leave on the tenant and the tenant ceases to occupy the property (consensual termination). Since this is uncontentious the rest of this section will focus on contentious repossession. There are 17 grounds for repossession under the current bill. Each ground is classified as either ‘mandatory’ or ‘discretionary’; this distinction is important in bringing confidence to landlords that they can recover their property. If the landlord is seeking to recover his or her property then they must first serve notice on the tenant stating the ground for repossession that they are seeking to rely on. Secondly, they must notify the local authority of their intentions and before making an application to the first-tier tribunal (after the expiry of the relevant period in relation to the notice to the tenant) who have to the power to make an eviction order. Thirdly, the landlord may have to supply evidence in support of their application. The relevant period may vary having regard to the circumstances as set out chapter 3 of the bill.

The first-tier tribunal will consider whether or not to make an order on a case by case basis. If the ground relied upon by the landlord falls into the category of ‘mandatory’, and it is found that the criteria has been fulfilled, then the tribunal must make an eviction order. If it is a ‘discretionary’ ground then even if the criteria for that ground are fulfilled, the tribunal has the final discretion on making the order. Currently 8 of the 17 grounds of repossession are entirely mandatory, 7 of the grounds are entirely discretionary and 2 of the grounds are mandatory or discretionary depending on the circumstances. Rent arrears can be mandatory or discretionary depending on the conditions that are met.

The details of the grounds for repossession are vast and therefore out with the scope of this article however, generally the grounds fall under the headings of:

1. Landlord intends to sell (mandatory)
2. Property to be sold by lender (mandatory)
3. Landlord intends to refurbish (mandatory)
4. Landlord or family member intends to live in the property (mandatory)
5. Landlord intends to use for non-residential purposes (mandatory)
6. Property required for religious purpose (mandatory)
7. No longer an employee (mandatory – can be discretionary depending on the circumstances)
8. No longer in need of supported accommodation (discretionary)
9. Not occupying let property (mandatory)
10. Breach of tenancy agreement (discretionary)
11. Rent arrears (mandatory – can be discretionary depending on the circumstances)
12. Criminal behaviour (mandatory)
13. Anti-social behaviour (discretionary)
14. Association with person who has relevant conviction or engaged in relevant anti-social behaviour (discretionary)
15. Landlord has ceased to be registered (discretionary)
16. HMO licence has been revoked (discretionary)
17. Overcrowding statutory notice (discretionary)

Rent

Under the current Bill the landlord can only increase the rent once in a twelve month period and only after giving at least 3 months’ notice to the tenant. This notice is effective from the date the tenant receives the notice. Tenants who believe they are being made subject to unfair rent increases can refer the rent for adjudication by the rent review officer. However, an important point to note is that the tenant can only refer the rent when an increase notice is served by the landlord. It is not possible to refer a rent simply because the tenant deems it too high.

Rent Pressure Zones

Section 30 of the current bill provides that a local authority may make an application to Scottish Ministers requesting that all or part of the authority’s area be designated as a rent pressure zone. After receiving an application from an authority, Ministers may bring forward regulations to designate an area as a rent pressure zone. This provision works as a mechanism to cap rent in such areas. This brings more stability to tenants who may have otherwise become subject to rent hikes in an area. However, concern was raised in stage one about the negative impact that rent pressure zones have had in other jurisdictions with the effect that rent is increased by the maximum permitted amount every year. In this case the capped amount would be greater than the rate of inflation and therefore there is the possibility of rent climbing high over an extended period of time. Despite this concern, the use of rent pressure zones might provide a degree of rent predictability for tenants and may allow them to better plan their finances which in turn may lead to a better rent recovery rate for landlords.

Summary

The introduction of the Private Housing (Tenancies) (Scotland) Bill will make a number of major changes to the current system and despite the stated aim of making the system simpler, it remains to be seen whether this will be the case in practice. If you think you may be affected by anything discussed please contact a member of our private client team who will be pleased to assist you in any way.

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