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Huge shake-up of Scottish private rented housing market

Author

Sharon Collier

An experienced Chartered Tax Adviser and Trust and Estate Practitioner, Sharon joined ETC Tax in September 2016.

Scottish Private Residential Tenancy regime

The Scottish Private Residential Tenancy (SPRT) regime is being introduced as a result of The Private Housing (Tenancies) (Scotland) Act 2016 which was passed by the Scottish Parliament on 17 March and received Royal Assent on 22 April 2016.

The Act will be introduced in stages and although a date has yet to be fixed it is expected to come into force in December 2017.

The legislation will introduce significant changes to the way tenancy agreements are created, managed and terminated. Crucially once in force, no new assured or short assured tenancies can be created.

The three criteria to be treated as a SPRT are as follows:

  1. The property must be let to an individual as a separate dwelling;
  2. The property must be the tenant’s only or principal home;
  3. The tenancy must not belong to a category which is specifically excluded under Schedule 1 of the 2016 Act, for example, holiday lets, social housing or properties with a resident landlord.

One key change is that tenants will have improved security of tenure. Existing short assured tenancies mean landlords can terminate a tenancy without giving any reason at the end of the initial period of the lease. Under the new tenancies, this “no fault ground” will not be available.

The new procedure aims to be simpler than before (and time will tell if this is the case), with no need for notices to be served prior to the creation of the tenancy. SPRTs will no longer have to specify an initial duration and either party can serve notice at any time (subject to the rules on termination set out in the Act).  A tenant wishing to terminate can provide written notice to the landlord.  The notice period must be as agreed between the parties or absent such an agreement, a minimum of 28 days.

The new legislation will also introduce restrictions on a landlords ability to increase rents.  Local Authorities will be able to apply for areas to be designated as rent pressure zones which will put restrictions on the amount by which rents can be increased within those zones.  Outside of these zones tenants will be able to refer a rent increase notice to a rent officer for determination.

Existing tenancies will remain in place, but depending on the terms of the tenancy agreement, some will become Scottish Private Residential Tenancies (SPRTs) when they reach the end of their current term.

This will mean automatic changes to some tenancy agreements limiting the grounds on which a landlord can terminate a tenancy and changing the period of notice the tenant must give to end the tenancy.

Depending upon your point of view the changes could be a well needed starting step to address significant issues in the housing market or yet another unprovoked attack on buy to let landlords.  One thing is for certain, this new change on top of the raft of recent tax changes means that landlords need to ensure that they are aware of all the recent changes and understand the impact on them.

Recent tax changes have included :

  • Restriction of tax relief on mortgage interest
  • Additional Land & Buildings Transaction Taxes
  • Abolition of Wear & Tear allowances
  • Higher Capital Gains Tax rates
  • Accelerated payment of Capital Gains Tax for Non Residents
  • Increased reporting for UK property disposals by Non Residents

If you have any queries regarding Scottish Private Residential Tenancy (SPRT), or any other matters, then please get in touch.

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