Currently, there are two major recent legal changes which will affect landlords in Scotland.
The introduction of the new Private Residential Tenancy (PRT) "regime" for Scotland and new taxation proposals.
Both changes could have a significant impact on the business and income of private landlords in Scotland.
In truth, at this stage many landlords are still not even aware of the impact these changes may have. However, many have serious concerns about the changes and feel they are unfair and poorly considered – in particular that they may not be “just and equitable”. There is a growing body of opinion that feels the legitimacy of the changes should be challenged to protect the rights and business interests of individual landlords.
The summaries outlined below contain links to further information on these changes.
The "new" Scottish Private Residential Tenancy (PRT)
The most immediate change is in regard to the introduction of a new Private Residential Tenancy (PRT) "regime" for Scotland.
The new PRT efectively replaces the (previously) widely used "short assured" tenancy - and is not a normal "contract" as such.
This major change is from the Scottish Government, who are implementing fundamental changes to the law in relation to tenancy agreements through the Private Housing (Tenancies) (Scotland) Act 2016.
This change will apply to any new private residential tenancy created from December 2017.
The changes (published in the Private Housing (Tenancies) (Scotland) Bill) are quite far reaching and significantly impact on landlords rights – in short to get rid of the current “short assured” tenancy. The overarching aim of the proposed new tenancy is to improve security of tenure for tenants.
The specific clause which is creating the most concern amongst landlords is removal of what’s termed the “no fault” clause. In short, whilst tenants retain their right to terminate their contractual tenancy agreement, landlords will no longer retain their right to terminate the tenancy without establishing good cause through “legal” process.
Whilst the issues with this change may not be immediately obvious, experienced landlords will be aware that in the (hopefully infrequent) instances of problematic or anti-social tenants, this could make things extremely difficult and very costly.
The Scottish Government has published information and guidance for private sector landlords on the Private Housing (Tenancies) (Scotland) Act 2016 about the private residential tenancy.
To view this information on the new Private Residential Tenancy click here.
The change to landlords' tax status
Landlords, especially in the higher tax brackets, should also be aware of changes from Westminster, where the Summer 2015 budget introduced a 'tax relief restriction' on 'private landlords'. The aim is to disallow finance costs (including mortgage interest) of individuals who operate buy to let properties in their own name. Clearly this could have very serious implications in regard to the profitability (or even viability!) of investment properties.