Troubling times for Scottish HMOs

Posted by IG Property in ,

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In England and Wales, the regulation of Assured Shorthold Tenancies - the most common type of contract between property owners and tenants in the private rented sector - falls under the Housing Act 2004. This legislation forms the cornerstone of housing contracts for millions of tenancies, including student tenancies, and sets out the legal responsibilities and rights of tenants and property owners during the tenancy period; for student tenancies, the provisioning of fixed-term tenancies in the Housing Act 2004 is crucial for property owners as it enables them to keep their tenancy cycles in-line with the academic year of higher education institutions. Given the seasonality of student house-hunting, it is important that accommodation becomes available at the correct time of year - when students need to move in- and not months later when the demand for accommodation has all but dried-up. Therefore, the powers afforded to property owners in England and Wales to evict tenants at the pre-agreed end-of-tenancy date ensures that the student HMO market runs smoothly.

The issue facing landlords in Scotland, however, is that the legislation regulating the rental market in Scottish towns and cities is decided by Holyrood and not Westminster; new legislation being phased in by Holyrood at the end of 2017 profoundly impacts how tenancy contracts between tenants and property owners can be structured. The Private Housing (Tenancies) (Scotland) Act 2016, which received royal assent in April 2016, will replace Short Assured Tenancies (SATs) - the Scottish analogue of ASTs - with Private Residential Tenancies (PRTs) that remove the 'no-fault' eviction ground, meaning that the concept of a fixed-term tenancy contract is no longer legally enforceable by property owners. For property owners in the student rental sector, this makes marketing for the next academic cycle nigh on impossible as there is no guarantee that the current occupants will vacate before the next wave of house-hunting students need to move-in.

The legislation does grant an exemption but only to instances in which the landlord is a university or constituent college or an institutional provider of student accommodation. As stated in the legislation:

"A landlord is an institutional provider of student accommodation if-

a) The landlord lets, or is entitled to let, other properties in the same building or complex as the let property

b) The let property and other properties together include at least 30 bedrooms, and

c) The landlord uses, or intends to use, the other properties predominantly for the purpose of housing students"

For larger HMO landlords operating within Scotland, this will certainly result in some operational headaches and will likely deter further investment in the HMO sector for student accommodation. As for the ongoing battle between Purpose Built Student Accommodation and HMOs, this will surely be seen as a coup for the former.


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