NEW RULES RELATING TO RENT INCREASES FROM APRIL

On the 31st of March 2024, the emergency Cost of Living (CoL) legislation brought in by the Scottish Government 18 months ago, will come to an end. 

 

WHAT WAS THE CoL RENT CAP?

The CoL legislation restricted rent increases on existing tenancies initially to 0% annually, and then this level was raised to 3% in April 2023 (up to 6% would be allowed in some cases but the landlord would have to provide evidence meeting some strict criteria for 3% to be exceeded).

 

WHAT WILL HAPPEN FROM APRIL ONWARDS?

Subject to Parliamentary approval, from the 1st April a lighter-touch limit on rent increases will apply to existing tenancy rents. From April 1st, a rent increase of any level can be served subject to the underlying rules relating to 3 months notice of an increase and only one increase in a 12 month period. If a tenant feels a rent increase is too high, they can appeal and then the landlord (or agent in our case) would have to provide evidence that the level of the open market rent (i.e. the rent that would be achieved if the property were advertised for let on the open market) justifies the increase.

 

OPEN-MARKET RENTS WILL BE USED FOR RENT INCREASES

In the event of a disputed rent increase, a tapering system will apply to set the new rent. The key points relating to the tapering system are:

  • If the open market rent is 6% or higher above the current rent, then an increase matching the open rent level up to 6% can be applied directly. 
  • If the open market rent is more than 6% above the current rent level and the landlord wishes to increase the rent by more than 6%, then a tapering system applies where the rent can only be increased by a third of a percentage point for every additional 1% (on top of the allowable 6%) that the open market rent is above the current rent. 
  • There will be an upper limit to annual rent increases of 12%.

 

WE’RE ON IT

The first thing to say about this is, don’t worry about the complexity of it, we will handle all of that for you when reviewing rents on existing tenancies.

The new tapering system, whilst making life more complicated when setting rents, is welcome news for landlords. It means that if rents rise significantly, like they have over the last 2 years, then we’ll be able to keep rent levels on existing tenancies closer to the open market rents, avoiding big disparities. 

Given the upcoming changes to rent caps, we’re holding off doing any annual rent reviews until the start of April where we will revert back to making recommendations to landlords about potential rent increases for their tenancies when they approach the 12 month anniversary of their last rent review.

 

OPEN-MARKET RENTS REMAIN UNREGULATED

It’s worth noting that open market rents will remain unregulated and so we will continue to advertise properties for let at a level we deem to be appropriate and achievable, for each property in each specific location.

If you want more information or want to discuss the rent level on your property in advance, please contact your Portfolio Manager.