July 2017 – Private tenancies – Old and New

Author: Brian
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The Bullet Point Updates for April 2016 and May 2016 gave an outline of the radical re-vamp of private residential tenancies under the Private Housing (Tenancies)(Scotland) Act 2016) (“the new Act”) which is expected to have effect from December this year.

The Scottish Government recently published guidance on the new Act for landlords https://beta.gov.scot/publications/private-residential-tenancies-landlords-guide/ and separately for tenants: https://beta.gov.scot/publications/private-residential-tenancies-tenants-guide/

This Update does not attempt a re-hash either of the 2016 Bullet Point Updates nor of the Scottish Government guidance but instead focuses on one particular aspect of the changeover to the new form of tenancy.

As mentioned in the earlier Bullet Points the vast majority of private sector residential tenancies in Scotland are either “assured” or “short assured” tenancies under the Housing (Scotland) Act 1988 (“the old Act”). Most tenancies tend to be granted as “short assured” tenancies because – as their name suggests – landlords can, in principle, get their property back more easily if they grant a “short assured” tenancy.

After the new Act is fully in force no new “assured” or “short assured” tenancies can be created. Instead all tenancies (with a few exceptions) will be “private residential tenancies” (“PRTs”).

The question: what happens to old tenancies when the new Act comes into force?

  • An obvious question arises: once the new Act providing for PRTs is fully in force what will happen to existing “assured” and “short assured” tenancies under the old Act?

Transitional provisions for (a) “assured” and (b) “short assured” tenancies under the old Act

  • The new Act covers this by way of what are called “transitional provisions”. But these are expressed in a slightly different way depending on whether the tenancy is an “assured” tenancy or a “short assured” tenancy.

General background to “tacit” or “silent” renewal of tenancies

  • In order to illustrate the difference some brief explanation of one key aspect of how tenancies generally work is needed.
  • Tenancies are usually granted for a specified period e.g. six months. One might have thought that if the parties formally agree that the lease is to end on a particular date there would be no need for any further formality to bring it to an end on that date.
  • But, in general, that is not so: if a tenancy is granted for a six month period then unless the landlord or tenant formally terminates it before the six months are up the tenancy will automatically continue for another six months. This is based on the presumption that unless one the parties indicates otherwise they consent to the lease continuing for another six months. The principle is known as “tacit relocation” or “silent renewal”.
  • But a tenancy may be granted on the basis that it will be for six months initially and then the lease expressly goes on to say that it will then continue for successive e.g. two month periods until one or other party formally brings the tenancy to an end. Many “short assured” tenancies under the old Act are granted on that basis.
  • In such a case the tenancy does not continue by “tacit relocation”/”silent renewal” because there is nothing “tacit”/”silent” about such renewal: it is expressly provided for in terms of the lease contract i.e. it is an express – not tacit – “contractual” term.
  • The difference here has a significance as far as the new Act’s “transitional provisions” are concerned.

Transitional provisions – “assured” tenancies

  • In essence, the transitional provisions are to the effect that no new “assured” tenancy can be granted on or after the date the new Act comes into force.
  • But, if an “assured” tenancy is in place before the new Act is in force it will in principle continue as an “assured” tenancy and continue to be governed by the old Act’s regime rather than its being converted to a new “PRT” under the new Act.

Transitional provisions – “short assured” tenancies

  • Similarly, no new “short assured” tenancy can be granted on or after the 2016 comes into force.
  • But otherwise, for “short assured” tenancies, the “transitional provisions” are a little different.
  • Suppose there is a “short assured” tenancy in place which provides that its initial contractual duration is for six months but the tenancy agreement says nothing expressly about its continuing at the end of the six months. In that case, as already noted, if neither party formally terminates it before the initial six month period is up then it will continue by “tacit renewal” for a further period of six months.
  • In such a case, the “transitional provisions” say that if at the end of the initial six month duration in terms of the lease “it continues by tacit [renewal]” then it will continue to be a “short assured” tenancy under the old Act. But, in this respect, the “transitional provisions” focus only on “tacit [renewal]”.
  • Suppose however, that when a “short assured” tenancy under the old Act was granted it provided it would (a) be for an initial six month period, and (b) then expressly went on to say that after that it would then continue for successive periods of e.g. two months. That would not count as continuing by “tacit [renewal]” because – as already noted – there would be nothing tacit or silent about such continuations: they would have been expressly provided for in terms of the tenancy contract.
  • So, in a case where a “short assured” tenancy expressly provides for such continuations the tenancy will not be covered by the ”transitional provisions” which specifically require the continuation to be “tacit”/“silent” – rather than expressly contractual – in order for the “short assured” tenancy to continue as such under the old Act. Instead, in terms of the new Act, the “short assured” tenancy will become a PRT under the new Act.

Scottish Government Guidance at odds with this

  • The Scottish Government Guidance is at odds with this. It says – emphasis added:

Existing tenancies

On the date the new [Act] comes in to force, any existing short assured or assured tenancy will continue until either the tenant or [the landlord] bring it to an end by serving notice to quit the let property. If [the] short assured tenancy is renewing on a contractual basis, this can continue to renew under the [old Act] until either the tenant [or the landlord] bring it to an end by serving notice to quit the let property.”

  • In other words, the Guidance says that even in a case where a “short assured” tenancy is “renewing on a contractual basis” i.e. because of an express provision in the tenancy contract (e.g. for successive two month periods after the initial six months) rather than by virtue of “tacit relocation” it will still carry on as a “short assured” tenancy under the old Act until formally terminated.
  • In this respect, the Guidance is at odds with the actual wording of the new Act. It is understood however that the Scottish Government intends to amend the new Act before it is fully in force so that it does reflect this Guidance.

Note: This material is for information purposes only and does not constitute any form of advice or recommendation by us. You should not rely upon it in making any decisions or taking or refraining from taking any action. If you would like us to advise you on any of the matters covered in this material, please contact Euan David: Euan@mitchells-roberton.co.uk

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