The Scottish Government is proposing A New Deal for Tenants, but what does it actually mean?
The Scottish Government has published its draft strategy for the private rented sector (PRS) under the banner of creating a New Deal for Tenants. The intention from the title is clear; this is a tenant focused strategy for the PRS with little focus on landlords or letting agents in the changes that it signals. It’s a high risk strategy given the current backdrop of record-low levels of available housing stock in the PRS and the knock-on effect on tenants of having very little available property choice and very high levels of competition in the market. The new strategy is going to reduce the number of future private landlords even further, making tough conditions created by lack of supply even worse.
These are the key points we took from the strategy document for landlords to be aware of.
Rent controls will be introduced
The biggest headline and the policy that’s likely to cause the biggest impact to stock levels is the introduction of rent controls on the PRS. The new strategy seeks to address the issue of a lack of data (needed to enforce previously legislated Rent Pressure Zones) with specific measures aimed at collecting relevant data on rent levels and new legislation might not be limited to mid-tenancy rent reviews but could be extended to cover the open market. If new legislation is introduced to cover rent levels on the open market, the impact on supply of rental stock will most likely be severe as investors will exit the rental market if their returns are capped and some new potential landlord entrants will be discouraged. This is probably the biggest question that hangs over imminent changes from this strategy.
The right to have a pet
The draft strategy indicates that tenants will have stronger rights when it comes to having a pet in a property. The current default position is that pets are not allowed unless express permission is given by the landlord, where usually a larger deposit is taken (albeit still under the legal maximum deposit amount of 2 months rent). What a tenant’s rights will be to have a pet in a rental property in future is not clear but the intention from the strategy is that tenants will have stronger grounds to have a pet in future than they do now. What this means for large pets in small properties, for example, is not clear. More detail will certainly be required if/when this is rolled out.
Redecoration & personalisation of properties
The strategy states an intention to give tenants greater power to make changes: to their rental homes. How landlords will be protected against unreasonable changes to properties that need to be reversed at the end of a tenancy is unclear. The strategy is clear that the government believes this is a right that tenants should have but how it will be implemented and what protections landlords will have is not detailed at this stage.
Ending joint tenancies
The signs are that legislation will be changed to allow an individual tenant in a joint tenancy to bring the whole tenancy to an end as an individual (currently it requires all joint tenants to end a joint tenancy). This is being framed in the consultation under preventing victims of domestic abuse being trapped or locked in to tenancies that they want to get out of. Nobody will argue with a joint tenancy being ended by the victim in the case of domestic abuse. There is a much more common situation where joint tenancies are ended in the case of student tenancies. This is where one student wants to leave a tenancy in the middle of the academic year and would be able to bring the tenancy to an end under new implied rules. This will leave some student landlords and tenants potentially exposed where flat-mates of an early departing student are left without a tenancy in the middle of their studies, or a landlord who might be left struggling to rent a student property in the middle of February.
Two-tier PRS being created
The expectation is that all of the changes listed above will not apply to purpose built rental blocks owned by institutional investors such as pension funds. This is because the government wants to do all it can to encourage investment from these institutions to help solve the housing shortage in the PRS. The government is in effect creating a 2 tier PRS where tenants who rent from a pension fund will have less rights than those who rent from an individual landlord. This exists already with the removal of fixed-term tenancies for all landlords in the PRS apart from institutional investors who can fix the duration of tenancies for as long as they like (or the market allows).
Tenants Union to be formed?
The strategy document hints that a new tenant union could be formed to better support tenants and inform them of their rights in the PRS. This is undoubtedly a good thing and long overdue. How a new tenant union will help tenants get recourse without a functional and adequately resourced First Tier Tribunal remains another problem that the current strategy document doesn’t address.
Watch this space
The detail of whatever comes next will be fascinating and will determine the effectiveness and impact of new legislation that is sure to be introduced in one form or another. Whatever happens, it’s certain to be a lively time in the PRS over the next few years and the people charged with translating and executing new legislation are going to have their hands full.