Consultation on a new tenancy for the private rented sector

Transcription

1 Consultation on a new tenancy for the private rented sector INTRODUCTION Scottish Land & Estates represents land owners, managers and rural businesses across Scotland with wide ranging interests including built property, agriculture, forestry, moorland management and tourism. Our members are significant providers of housing across rural Scotland and housing legislation affects nearly all of our members day to day business activities. Scottish Land & Estates therefore welcomes the opportunity to provide comments on the consultation on a new tenancy for the private sector. Scottish Land & Estates was an active member of the Review Group and is supportive of a modern and simple tenancy that will enable tenants, landlords and agents to build a thriving private rented sector. We were encouraged by the Review Group s decision to recommend a package of reforms which would create such an outcome. We have, however, become increasingly concerned about the direction of travel that this consultation has taken. There appears to have been a shift from aiming to create an effective and well understood tenancy to creating a secure tenancy. We are concerned that this will result in the disincentivisation of much needed investment into the sector and put the most vulnerable private housing applicants at risk. Our members are committed to delivering safe homes and view their role as one which is akin to social housing providers in that meeting housing need is of paramount importance. However, private landlords and social landlords do not operate under the same funding support framework and nor should they be run under the same legislative framework. Adequate housing supply is dependent upon a range of housing options, of which the private sector is one. Blurring the distinction between private and public will both impact on supply and limit housing options for society. Scottish Land & Estates believes that policy should be evidence based and there is no evidence to show that tenants want or need greater security of tenure. Indeed, Scottish Government research indicates that two thirds of tenants had no issues and that of the one third that did have issues, only 1% cited insecurity of tenure as a problem despite being prompted by a list 1. Arneil Johnston explained in the Dumfries and Galloway Rural Private Rented Housing & Fuel Poverty Final Report that households in (rural) private rented accommodation tend to be very stable with almost 30% being resident for more than 15 years". In an urban setting it is generally assumed that the average length of a private tenancy is 18 months 2. Research has also indicted that the broad support for SATs from both landlords and tenants 1 Scottish Government, Review of the Private Rented Sector: Views and Experiences of Tenants in the Private Rented Sector, Dumfries and Galloway; Rural Private Rented Housing & Fuel Poverty - Final Report; February 2004

2 suggests that any reform would need to be approached with caution 3. To change such a fundamental aspect of what a private tenancy consists of with no evidence that it is wanted or needed is far from cautious. ANSWERS TO THE CONSULTATION QUESTIONS Question 1: Do you agree that the no-fault ground for a landlord to repossess their property should be excluded from the new tenancy system? No. The Review Group clearly recommends (page 10) that there should be a route for landlord repossession following the expiry of the agreed tenancy term. Scottish Government is free to disregard the recommendations of the Review Group but should be explicit about doing so and explain the reasons for such a decision. As a member of the group Scottish Land & Estates is clear that a package of recommendations was made as a coherent whole; the Scottish Government should be cognisant of the implications of omitting parts of this package for the effectiveness of the remainder. We are disappointed, not only that the recommendation of the group has not been followed, but that the consultation misrepresents the recommendations stating the group was silent on the issue. Scottish Government must recognise that removing the no fault ground removes the basis to the contract between landlord and tenant. Landlords should not be obliged to provide accommodation to a particular tenant on a permanent basis even if that tenant is not at fault. The needs of investors and lenders must also be addressed as these new tenancies will be seen as higher risk. Low yields and high risks will lead to the sector shrinking rather than growing. Homes let with affordable rents will be particularly at risk. The PRS is currently heavily regulated and the Scottish Government must be careful this does not tip the balance so that current or potential investors feel it is not worth their efforts or money to invest. Our members have reported that should the tenancy proceed as per the consultation document they would be re-assessing their property portfolios. Some members will look to sell properties which will perhaps remove them from the rental market and will almost certainly remove them from the affordable rented market. In light of the risks and also an upsurge in the popularity of agri-tourism, some properties will be used as holiday cottages rather than longer lets. This not only removes the risk associated with secure tenants but is also favourable in terms of capital taxation and can attract a higher monthly income. Members who wish to continue to provide rented housing report that they will regretfully have to assess their current tenants and any who have caused any reason for concern will not go through the transition to the new secure tenancy. There is always a good reason why a landlord wants to end a tenancy; it may not be as clear cut as a restricted number of set grounds. There therefore needs to be a mechanism to account for these cases. 3 D, Barr, K, and Dean, J, Research on the Private Rented Sector in Scotland, Department of Urban Studies, University of Glasgow, 2002.

3 Having to formally identify a fault forces the landlord into the situation where s/he has to gather information about the tenant s behaviour and prove fault and therefore cause conflict or tension where it was perhaps not otherwise present. Bearing in mind experience with regard to agricultural holdings legislation, this could be detrimental to landlord/tenant relationships making it more difficult to resolve issues. It could also lead to evicted tenants finding it more difficult to find their next PRS home. There needs to be some thought given to student lets. Without a no fault ground it will be problematic to plan ahead to the following academic year. This will lead to the system not being effective for landlords or students. Winter lets are a use of holiday properties in the winter. This helps people move between more permanent arrangements and gives the owner an income and peace of mind that the property is not unoccupied during the quieter and colder months of the year. How these fit into the new tenancy framework will need to be considered. Consideration should also be given to private sector leasing schemes as very few properties will be committed to these schemes if there is security of tenure. With no evidence to show that the First Tier Tribunal will be quicker, cheaper and more effective than the current system, it is very difficult to have confidence and support the removal of the no fault ground on this basis. See Q13 for proposal. Question 2: Do you agree that the ability to roll over tenancies on a monthly basis should be excluded from the new tenancy system? No. The month to month rollover allows for flexibility for both parties and should be the statutory position. Although the aspiration is to encourage longer-term letting, a rollover equivalent to the initial period (i.e. an initial let of 6 months would roll over for 6 months rather than on a monthly basis after the initial period) will disincentivise landlords from longer-term letting; they would be more likely to stick to the minimum period and are unlikely to offer an initial period for longer than the minimum because of the possible consequent rollover. Question 3a: Do you agree that the new type of tenancy should have a minimum duration of six months? Yes. The minimum period of 6 months appears to be desired by both landlords and tenants so we support this proposal. Question 3b: Do you agree that the tenancy should have no maximum period? Yes. A maximum period is unnecessary as long as the landlord has the ability to recover possession after the initial period without using a prescribed ground. However, if the no fault ground is removed a maximum period of let should be in

4 place, after which the landlord should be able to gain possession without having to use a specified ground. There is of course a restriction in terms of the tenancy length as Scottish residential tenancies were limited to 20 years through section 8 of the Land Tenure Reform (Scotland) Act Question 3c: Do you agree that a tenant should be able to request a shorter tenancy? Yes. This flexibility is welcomed. However, landlords must not be obliged to provide a shorter tenancy upon the prospective tenant s request. Question 4a: Do you agree that the notice period should be linked to how long the tenant has lived in the property? Yes. We support this proposal as we agree that where a tenant has been living in a property for a long time, it would be reasonable for the tenant to receive a longer period of Notice to Quit from the landlord. Question 4b: Do you agree with the four proposed notice periods? No. We suggest that the final category of 5 years or more should be removed. We believe that 16 weeks is too long a period as landlords need the ability to implement changes such as the change of use or renovation works within a reasonable timescale. 12 weeks for occupation of 2 years or more should be the maximum notice period as it provides adequate time for tenants to make alternative arrangements for accommodation. Question 5a: Do you agree that all the proposed repossession grounds should be mandatory? Although we support the aim of simplification and clarity, we do not believe it is workable to only have mandatory grounds. Many issues involving two parties will not be clear cut and will require a decision to be made by a third party (First Tier Tribunal) to ensure that appropriate actions can be taken where warranted. This may include persistent delays with rent payment or the condition in which the property is kept. If a no-fault ground is not included in the new tenancy it is vital that a discretionary ground is included to cover any other circumstances under which the landlord can apply for repossession. Question 5b: Do you agree with the proposed list of new repossession grounds? No. We believe that although this list attempts to simplify and modernise the current grounds it is, unfortunately, unworkable.

5 1. Landlord wants to sell. We agree vacant possession should be available if the landlord wants to sell the property but clarification is needed as to what stage in the proceedings possession is granted. We would suggest that it needs to be prior to advertising as many landlords will want to undertake work on a property before it is marketed. 2. Mortgage lender wants to sell because the landlord has broken the loan s conditions. Again, clarification is needed as to what stage in proceedings eviction can occur. 3. Landlord or family member wants to live in the property. We support the inclusion of this essential ground and suggest it should also include the beneficiary of a trust or their family. We suggest that there is perhaps a need to define family member to prevent any misuse of this ground. 4. Refurbishment There are numerous questions in relation to this ground which need to be considered: What degree of refurbishment is required to meet this ground? Will this be judged on the period of time the works will take? Will the tenant have to be offered the property back after the refurbishment? 5. Change of use Again there are a number of questions in relation to this ground: Is this change of use as defined by a planning application for change of use? What about change of use within a planning use class? Again, at what stage can repossession take place? 6. Tenant has failed to pay full rent over 3 months. We support the inclusion of this ground and the consideration that has gone into the wording. The wording of this ground is crucial as the existing ground regarding non-payment of rent does not work well due to the fact that it allows a tiny partial repayment to evade eviction. We believe that 3 months is too long for the landlord to have to go without rent before the eviction process can begin. The maximum deposit is currently the equivalent to 2 month s rent and many landlords only request 1 month s. This will not cover lost rent which can accrue before the landlord is able to use this ground. Habitual or persistent delays in rent should also be recognised as they not only create extra management costs and stress but can impact upon the landlord s ability to budget for mortgage repayments and repairs.

6 7. Tenant has displayed antisocial behaviour There is a need to define anti-social behaviour. There is significant evidence that anti-social behaviour is still a subjective matter. We would suggest that the formal granting of an ASBO or a requirement for a specific number of incidences are not adequate ways of defining anti-social behaviour. We would like to see criminal convictions and use of the property for illegal purposes to be included. It must be recognised that this ground puts significant pressure on the landlord, agent and neighbours to collect information on the anti-social tenant. A member reported a situation where a tenant invited his partner to live with him. The partner has a criminal record and neighbours (who are also tenants of the estate) have expressed concerns over her behaviour. The member will be communicating with the tenant and his partner over her behaviour and the impacts on their neighbours but should this not solve the problem the no fault ground will be used. There is nothing in the proposed tenancy which would allow the member to deal with this issue and look after his other tenants. Another member has reported her struggle to deal with a tenant who would perhaps not qualify for this ground but is causing distress to the member and her other tenants. The member is recently widowed and lives alone. A male tenant lives in the gate lodge at the foot of her drive. There have been problems with payment of his rent, his aggressive dogs, his reckless driving on estate roads and his general behaviour towards the member and the neighbouring tenants. The police have reported that they cannot do anything. 8. Tenant has otherwise broken the tenancy agreement. If there is to be no mechanism to enforce the landlord s right to repossession at the end of the initial period we support the inclusion of this ground. Question 5c: Are there other repossession grounds we should include in the list? Yes. We believe that the landlord should be able to repossess the property to house a worker who is required to live in that locality for their occupation. There are numerous examples of where this would be relevant and this is particularly crucial for landlords who are trying to sustain rural businesses. A member has raised a concern which will be relevant to many rural property owners. The member owns and manages a mixed rural estate. The majority of the cottages are under one ownership and the land and remaining properties are under another. Due to expansion of the farming enterprise a new farm worker was recently employed and the no fault ground was used to gain vacant possession of a cottage for the worker and his family. The wording of an employee ground would have to be carefully thought out or it would not be relevant in this case as the employer and the

7 property owner are different. We suspect it is impossible to adequately phase this ground to ensure it can always be used for the intended purpose. There is therefore a need for a no fault ground to ensure these less than straightforward situations are catered for. Question 6: Do you agree that landlords should be able to recover possession of their property with a 28-day notice period in the circumstances proposed? No. Twenty-eight days notice for recovery due to a breach doubles the current notice period required. Currently only 14 days notice is required when serving an AT6 on the basis of a breach including the non-payment of rent. We would not support a longer notice as the landlord has already suffered due to the tenant s behaviour and therefore the process must proceed swiftly to prevent further losses. Question 7: Do you agree that landlords should no longer have to issue pretenancy notices to recover possession of their property? Yes. We welcome the proposal to remove the requirement for pre tenancy notices. Question 8: Do you agree that the notice period for all proceedings should be four weeks? No. Doubling the notice period from the current 14 days is excessive. By the stage that the landlord can raise proceedings they are likely to have already suffered significant financial losses. It is therefore crucial that the process is quick and simple. Question 9: Do you agree with the proposed timescales for a tenant giving notice to a landlord to leave the property? No. If the Scottish Government is aiming to have a more equitable system, then Scottish Land & Estates would suggest that the same scales of notice periods are used for both landlords and tenants. Question 10: Do you agree that a model tenancy agreement should be introduced? Yes. We agree this would make the process more straight forward for all involved. However, the creation of this tenancy agreement should occur by a process of stakeholder engagement and consultation to ensure it is fit for purpose. The scope for flexibility within the new tenancy must remain as one size will not fit all and there should also be scope for specific agreed contractual terms between the landlord and the tenant. Question 11a: What are your views on rent levels in the private rented sector in Scotland?

8 Rent levels are generally driven by the market. We appreciate there are hotspot areas such as Aberdeen driven by high demand and low supply, but the rural PRS, which our members deliver, has rents which are in the main below market level. In addition, market rents for some properties also enable landlords to provide other houses at affordable rents to meet local housing need. Any forced distortion such as rent setting or capping will threaten this current status. In rural Scotland, private renting* is a major contributor to the local economy through (among other factors) providing affordable rented homes in areas where there is little other rented housing. *Of the private landlords within this study s area the great majority were rural landowner landlords. Arneil Johnston: Dumfries and Galloway; Rural Private Rented Housing & Fuel Poverty - Final Report; February 2004 Scottish Homes reported (SH Report 83, in 2000) that (landowner landlords) very commonly, set lower rent levels for local people than charged to the wider market. The Local Deeside Group of Estates, Finzean, Ballogie, Kincardine, Dinnet, Macrobert Trust, Mar, and Invercauld, assessed their rented property stock. On each of these estates between 60% and 100% of (>250) properties are leased at affordable rent. Question 11b: What action, if any, should the Scottish Government take on rent levels in the private rented sector in Scotland? The Scottish Government should not intervene other than to encourage the provision of new homes in all housing sectors, both in urban and rural environments. Scottish Land & Estates supports the provision of affordable housing but remains frustrated that financial support continues to be directed almost entirely at social housing providers when evidence shows that private landlords are capable of providing greater value for tax payers money. The Rural Homes for Rent Scheme pilot has enabled the development of affordable rented homes by private estates in rural areas. For some areas the addition of new housing secures a future for villages which have experienced the closure of shops and pus and are threatened with school closures. These homes will be available at an affordable rent for at least 30 years. Rent reviews are restricted to RPI + 1% and the landlord had to prove he/she had the suitable experience to deliver and manage the scheme as well as become an accredited member of Landlord Accreditation Scotland. Scottish Land & Estates believes that support for the rural private rented sector on a similar basis would not only increase the supply of high quality affordable rented housing but would do so while making better use of public funds than confining support to social housing providers achieves.

9 Question 11c: What rent review conditions, if any, should the new tenancy system include? Rent reviews should be in line with the market. We are happy to see these limited to an annual basis for sitting tenants which is already common practice. We welcome the suggestion that the rent review clause clearly explains to the tenant when and how their rent will be reviewed. Question 12: Overall, do you feel that the proposed new tenancy system strikes the right balance between the interests of landlords and tenants? No. Although the proposed new tenancy has many positive elements it will not only fail to deliver Scottish Government s objectives, it will detrimentally affect the PRS. As explained in the pre-amble to the consultation the PRS has grown significantly in recent years. Although we recognise some changes are required to simplify and modernise the regime, this is evidence of a system that, on the whole, works. The paper does not give justification for some of the proposed changes, particularly to the removal of the no fault ground. Question 13: Do you have any (other) suggestions/comments on the new tenancy system for the private rented sector? If so, please tell us. We believe that solutions to identified problems should be developed rather than blunt tools introduced which will impact on the entire sector. If the Scottish Government is minded to make changes to the no fault ground then we propose that consideration is given to the idea of a restrictable mechanism for the landlord to regain possession on a no fault basis once the initial period has completed. The Scottish Government s 2009 Review of the Private Sector showed tenants prime concern is about having necessary repairs carried out within an acceptable period of time. The Private Rented Housing Panel (PRHP) enables tenants to report landlords who fail to undertake their duties. However, currently tenants may be fearful to use this mechanism due to fear of eviction using the no fault ground. We propose the no fault ground should be frozen at the point of the tenant s application to the PRHP and if the landlord is found to be in breach of their responsibilities and given a repairing standard enforcement order then the ground remains frozen for an appropriate amount of time (related to the severity of the breach). However, if the landlord is not found to be in breach then the restriction is lifted. We also suggest that the no fault ground can only be used if the landlord has complied with all necessary regulations such as landlord registration, safety tests and lodging the deposit with an approved scheme. This is similar to section 44 of the Housing (Wales) Act 2014 and will help to drive up quality in the sector whilst not being onerous on the compliant landlords.

10 This solution addresses the evidence-based issue that tenants have while giving landlords and lenders the security they need in order to invest in the provision of much needed homes.