What do new tenancy agreements mean for the housing sector?

Private rentals make up around 15 per cent of all housing in Scotland, providing homes for about 760,000 people. And so, when the Scottish Government announced plans for “the most significant reform of private renting in more than a quarter of a century”, landlords and campaigners took notice.

The Scottish Government introduced new tenancy agreements with no end date, known as private residential tenancies (PRTs), at the end of 2017, with Holyrood’s event on navigating the new regulatory framework aimed at helping stakeholders get to grips with the new system.

Linda Leslie, the Scottish Government’s head of private rented sector policy, told delegates the aim was to improve security for tenants and create new safeguards for landlords. Under the new agreements, PRTs can only be terminated by a tenant giving written notice to their landlord or by the landlord using certain pre-approved grounds for eviction.

Meanwhile, landlords will only be able to increase rents once a year, and only after providing tenants with three months’ written notice in advance.

Announcing the changes, Housing Minister Kevin Stewart said: “We want to ensure everyone has a safe and warm place to call home. The new tenancy sits alongside our wider ambitions for housing in Scotland – not least our ambitious commitment to deliver at least 50,000 affordable homes during this parliament, including that for rent.”

Campaigners too were positive, with Shelter Scotland director Graeme Brown describing the new system as a “new dawn for all private renters” which will bring “unprecedented security of tenure to private renters”.

But while the new agreements generated widespread praise, there is also a recognition that it will take time to assess the new system in practice.

Under the terms of the new PRTs, there are 18 grounds for terminating a tenancy, and until landlords and tenants have been given the opportunity to explore the system in practice, it may be impossible to predict how it may be exploited.

For example, a landlord can end a tenancy on the basis that they intend to sell the property. But critics have questioned how a landlord would go about proving their ‘intention’ to sell. What if an unscrupulous landlord, for example, unable to raise the rent due to restrictions imposed in the new framework, tried to circumvent the rules by announcing they plan to sell and evicted the tenants, only to have an apparent change of heart and deciding to re-let the property, this time at a new, higher rent?

Similarly, a tenant could also face eviction on the basis that the landlord intends to carry out “major works” to the property, which could be so disruptive that the tenant wouldn’t be able to live there. But how do you prove that?

As Heather Pearson, a partner at Addleshaw Goddard put it while speaking at the event: “There has been much debate over whether some of these grounds could be open to manipulation. For example, how could a landlord demonstrate that they intend to carry out major work, or to sell the property? It may be too early to say how these [changes] may be stretched by rogue landlords.”

The Scottish Government’s guidance states that an owner would need evidence to prove their intention to sell – for example, a letter from a solicitor, or a recent home report for the property – while the intention to do major works could be proven with an application for planning permission, or a contract with a tradesman, but until the system has been running in practice then uncertainty remains.

Meanwhile, Pearson explained, voices in the private sector have expressed concern over other aspects of the new agreement, particularly measures aimed at curbing rents and the decision to end ‘no fault’ evictions, which she said could disadvantage landlords.

There is also a concern over how the new rules will affect landlords, she explained. “For a tenant, it is relatively straightforward, they can bring their tenancy to an end at any time, after giving the landlord 28 days’ notice. It’s worth noting, however, that if a tenant changes their mind halfway through those 28 days, as a landlord, you have to agree to continue the tenancy.”