Consultation is Open
The period is open for consultation on a New Tenancy for the Private Sector from the Scottish Government and I’m encouraged by what is in the consultation document. The Scottish Government is seeking to implement a new type of tenancy for the private rented sector in Scotland and with good reason. As anyone will know who has been party to a short assured tenancy agreement in Scotland it is currently an unnecessarily complicated contract.
What’s Wrong with the Current Tenancy?
To start with, an AT5 agreement must be signed at the start of the tenancy before the lease. The AT5 is crammed full of prescribed statements and information that does not make easy reading. The AT5 must be signed, dated and timed before any signatures on the lease. The lease is a weightier document than the AT5 and it contains 17 grounds for ending a tenancy, 8 of which are manadatory and 9 that are discretionary (i.e. up to the individual presiding in court in the event of legal action for repossessing the property). As well as the lease, there are more legal documents required to support a robust tenancy agreement the most notable of which is the Tenancy Information Pack that was brought in last year. Serving notice is a minefield for any landlord to walk as the correct combination of Notice to Quit, AT6, Section 33, Notice to Quit date (there are a few options here), ish date and ground for ending the tenancy must be assembled correctly and the varying options here number in to the thousands where usually only one is correct for any given situation. So, in light of these points alone, news of a new, simpler tenancy is good news indeed!
What’s Being Proposed?
A new tenancy agreement is proposed that would see the end of the AT5 and the Tenancy Information Pack leaving a single lease document. The new tenancy will have only 8 grounds for ending a tenancy (all of the mandatory, no discretionary) and notice periods will be simplified to 28 days for all grounds with some of them being extended if the tenant has been in the property for longer than six months.
Yet to be Decided
There are some areas of the new tenancy where decisions are still to be made. One of these is the period with which a lease is extended after the initial period. In the majority of leases that Umega is involved in, the initial tenancy period is six months. At the end of this time, if no new lease is agreed and neither party has served notice then the lease rolls on a month to month basis. One option being considered for the new tenancy is that the new lease would automatically renew for the same period again (i.e. six months). I do not think this is a good idea because it goes against some of the simplicity that has been outlined above. It’s my interpretation that the renewal of the initial period is there to provide tenants with more security over their lease but this is outweighed by the confusion created around notice periods. For a tenant in Edinburgh who has lived in a property for a year or two the notice period would be eight weeks under the new tenancy however not if they are only two months in to another 6 month tenancy.
There is also a section around rent reviews and many landlord bodies are up in arms as they are concerned about rent controls being introduced. It’s hard to see anything meaningful materialising here. A limit of a 10% increase once a year was suggested in Westminster for the English and Welsh system. If something similar was introduced in Scotland then this would certainly not restrict the market in Edinburgh as I’ve known it over the last ten years. I don’t see a rent control being introduced but we’ll see.
A new tenancy agreement as being proposed is great news! I welcome it and hope it arrives sooner rather than later. I hope they keep the rolling month to month leases after initial periods and any moves around rent controls (unless drastic) will probably soak up most of the headlines but would ultimately serve the private rented sector well in the long-term.