October 2015 – Private Tenancy Rent Control

Author: Mitchells Roberton
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Introduction 

  • The Bullet Point Update (No. 4) for April this year said something about changes in the offing for private rented sector tenancies. Things have moved on a bit since then and the changes now included in The Private Housing Tenancies (Scotland) Bill 2015, introduced to the Scottish Parliament on 7th October, have been modified in various respects from those heralded in April.
  • This Note however does not aim to outline the current Bill generally. Instead it focuses on one particular aspect of the Bill’s proposals: those concerning private rents.
  • Similarly, this Note is not concerned with giving a general overview of the law about private sector tenancies. Something is said about the current set-up for them in the “Notes on Common Topics” section of this website in a note headed “A (non-comprehensive) to-do list for new residential landlords”. That note observes that – under the current rules – the most common type of private rented sector tenancy is that known as the “short assured tenancy”. Perhaps the most striking feature of such tenancies is that, as their name suggests, they are, in principle, easy enough to bring to an end.
  • Accordingly, this note focuses exclusively on the current regime governing rent control for short assured tenancies and then touches on what the new Bill proposes regarding rent controls.

The current regime – rent control – “short assured” tenancies 

  • The starting point is that with short assured tenancies the rent is the “market” rent agreed between the tenant and landlord. But, ultimately, the “Private Rented Housing Panel” (“the PRHP”) has a role in rent setting. (The PRHP was set up under the Housing (Scotland) Act 2006 and is a body designed to help landlords and tenants resolve their differences. It is independent of the Scottish Government but gets Government funding.) As far as “short assured” tenancies are concerned:
  • If a tenant thinks they’re being charged too much rent they can apply to the PRHP and ask for one of its committees to make a determination about the rent level.
  • The committee will only set a rent if they consider (i) that there are enough similar houses in the relevant area also let on assured tenancies so as to be able to draw a meaningful comparison, and  (ii) the rent in question is significantly higher than those comparators. In this context “significantly higher” seems to mean at least 10% higher.
  • If the committee does decide to set a rent, it will be the maximum that can be charged for at least 12 months from the date it has effect.
  • Although the scope for making such applications exists referrals to the PRHP about rent are rarely made. By way of illustrating that there are only nine decisions shown on the PRHP website concerning rents for “short assured” tenancies and in only four of those was the rent reduced.
  • Because landlords can, in principle, end a “short assured” tenancy fairly easily a tenant who thinks their rent too high may not think it worth applying to the PRHP in the hopes of being awarded a reduced rent. If successful, the landlord could simply end the tenancy rather than accept a reduced rent and then find another tenant willing to pay more. This may be an explanation for there being so few referrals to the PRHP in “short assured” tenancy cases.

The Private Housing Tenancies (Scotland) Bill 2015 – consultations and the Bill’s proposals

  • The Scottish Government issued two consultation papers on proposals to reform the current private tenancy regime (in 2014 and 2015). The first consultation sought general views on rent levels and whether the Scottish Government should take some kind of action. The second consultation paper outlined the Government’s intention not to introduce general controls on rents but sought views on whether there was a need to introduce limits on rent levels for sitting tenants in “hot-spot” areas.
  • In the event, the Bill proposes to introduce a new form of tenancy for private tenants replacing the existing “short assured” (and “assured”) tenancies. As regards the question of rent,  the Bill proposes that:
  • Rent reviews should take place no more than once in any 12 month period;
  • Tenants should receive 12 weeks’ notice in advance of a change in the rent;
  • If a tenant considers that any proposed rent increase would take their rent beyond rents charged for comparable properties in the area, they will be able to refer the increase for adjudication to a rent officer (as defined in section 43 Rent (Scotland) Act 1984); and
  • No national rent controls will be introduced.
  • But, under the Bill’s proposals, local authorities would be able to apply to Scottish Ministers requesting that all or part of their area be designated as a rent pressure zone. In making their application a local authority would be required to satisfy Ministers that:
  • rent increases for sitting tenants in the area to be designated were: rising excessively; causing hardship to sitting tenants in the area and having a detrimental effect on the broader housing system.

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: efd@mitchells-roberton.co.uk

 

 

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