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Legislation, Edinburgh, Property Management
Navigating Edinburgh’s property regulations
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Legislation, Glasgow, Guides, Landlords, Letting, Tenants
LATEST UPDATE ON THE REPAIRING STANDARD JAN 2023
Latest update to the Repairing standard – Lead Pipes Private rented properties as we all know are heavily regulated and in addition to all other requirements expected to be adhered to, all private landlords must ensure that their properties are served by a water supply system that is in a reasonable state of repair and […]
Legislation, Letting
What will happen after the 31st March 2024 regarding Scottish Government’s Rent Cap?
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Legislation
Landlords, are you ready for the changes to EPC regulations ?
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Legislation
COST OF LIVING (TENANT PROTECTION) (SCOTLAND) ACT 2022 – RENT INCREASE BAN UPDATE
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Legislation
Scottish Property – Cairn Legislation Update ( 9th November 2022 )
Cost of Living (Tenant Protection) (Scotland) Act 2022 Following our series of blogs on the rent increase and eviction ban, we can confirm that the Cost of Living (Tenant Protection) (Scotland) Act came into force on 28 October 2022. The legislation will be in force until at least 31 March 2023 and can be extended (with parliament agreement) to 30 September 2023 and again to March 2024. Rent increase ban Under the current legislation, any rent increase notices served on or after 6 September 2022 fall under the permitted rate cap of 0%. Meaning a landlord cannot increase a tenants rent on or after this date until the rate cap is either increased or removed. The permitted rate cap does not affect increase notices issued to tenants before 6 September 2022, these are still enforceable under the legislation. There are some options still available to landlords: Landlords can increase the rent between tenancies. Landlords can still increase the rent for Short Assured / Assured tenancies which have a rent increase clause within the lease. The cap does not affect rent increases for these tenancies, regardless of the date the increase was served if there is a rent increase clause within the contract. Landlords can apply to the Rent Service Scotland for an increase up to 3% to cover increases in the ‘prescribed property costs’. Prescribed property costs Prescribed property costs per the legislation are: The interest payable on any mortgage or standard security over the rented property. Any insurance premium you pay which relates to offering the property for rent. For example, landlords’ insurance. Increases in premiums for building or property insurance are not included. Any service charges related to the rented property that the tenant pays towards as part of their rent if this was agreed between you and the tenant as part of the terms of the tenancy. Landlords can apply to Rent Service Scotland to increase the tenants rent to recover up to 50% of the increase to the prescribed property costs above. This application can only be for prescribed costs in the last 6 months prior to the application being made. If Rent Service Scotland is assured that the landlord’s prescribed property costs have increased within the last 6 months and that the increase proposed by the landlord represents no more than 50% of those costs, the rent officer must order a rent increase. The maximum increase in rent permitted through this process is 3%. To apply to increase the rent landlords must complete the government application form, which can be found here: https://www.gov.scot/publications/rent-cap-private-landlord-guidance/documents/ Landlords are required to notify the tenant of their intention to increase the rent before the landlord form is submitted to Rent Service Scotland. The government has also provided wording for this notification which can be found here: https://www.gov.scot/publications/rent-cap-private-landlord-guidance/documents/ The rent increase comes into force 3 months and a day after the landlord issued notice to the tenants of the proposed increase. This legislation has also been written into the Private Residential Tenancy agreement (PRT). Eviction ban Under the legislation, the issuing of notices to end the tenancy is not banned. Landlords are still free to serve notice to end the tenancy if they wish to do so. In most cases, tenants vacate the property during the notice period, it is only when the tenant does not vacate the property that the restrictions may come into effect. If the tenant doesn’t leave at the end of the notice period, the landlord can still apply to the Housing and Property Chamber, First-tier Tribunal for Scotland for a formal eviction order. If and when the eviction order is granted, the legislation places restrictions on Sheriff Officers from enforcing this order and recovering the property for the landlord. The legislation states that evictions cannot be enforced until restrictions are lifted, or the order has been in force for 6 months, whichever is sooner. There are some exceptions to this restriction, which are detailed below. Exempt eviction grounds: The tenant is not occupying the Let Property as his or her only or principal home The tenant has a relevant criminal conviction The tenant has engaged in relevant antisocial behaviour The tenant has associated with a person who has a relevant conviction or has engaged in antisocial behaviour Let Property to be sold by the mortgage lender. The tenancy was granted to an employee and the Tenant is no longer an employee. New grounds have also been included in the PRT under the legislation which are exempt: The Landlord intends to sell the Let Property to alleviate financial hardship. The Landlord intends to live in the Let Property to alleviate financial hardship. The Tenant is in substantial rent arrears (equivalent to 6 months’ worth of rent). The above grounds also apply to Short Assured and Assured tenancy agreements, however the notice periods differ slightly per the terms of the lease. Landlords need to provide evidence to the Tribunal of the eviction ground being used / demonstrate their financial hardship. These could include: a letter of advice from an approved money advisor, local authority debt advice service, independent financial advisor or from a chartered accountant. an ‘affidavit’ stating that you are intending to sell the let property or to live in the let property. This is a particular type of statement which is sworn under oath There are other types of evidence which landlords can provide to the Tribunal to demonstrate financial hardship, such as: Information detailing your income Details of the things you are responsible for paying Any outstanding debts or payments which you need to make Information to show that you are not able to cover the essential things you have to pay for because you do not have enough money coming in Information to show that you are often unable to make any essential payments or repayments which you are required to make Information to show that you are having to borrow money in order to pay your bills Information to show that you are only able to make essential payments by selling things you own Information to show that you are on a formal debt management plan Information to show that you are bankrupt Information to show that you are unable to meet the costs of maintaining or repairing the let property to meet the standards you are required by law to meet as a landlord The Tribunal will consider all relevant information in the case, including any evidence or information provided to them, and decide whether it is reasonable to evict the tenant. For any eviction applications submitted to the Tribunal before 28 October 2022, these should still be heard as normal, and the eviction should be enforceable under the legislation as long as notice was served on the tenant prior to 6 September 2022. Our qualified and knowledgeable staff at Cairn are always on hand to support landlords with any queries they may have regarding rent increases or evictions during this ban. With the ever changing legislation being implemented on private residential landlords, it is imperative that landlords employ reputable and qualified agents to manage their properties in Scotland. This will ensure legislation is being followed and that the most recent and correct advice on how to manage tenancies is being received. At Cairn, we have fully qualified and friendly staff waiting to assist landlords with management of their properties, we also have an in-house Compliance Manager who is both ARLA and LETWELL qualified to assist landlords with more difficult tenancy issues. Please do not hesitate to contact us to obtain further information on our management services.
Legislation
Compliance Update – Electrical Installation Condition Reports
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Legislation, Landlords
Legislation Update – Answers for Landlords
Rent increase and eviction ban Scotland Following our last blog on the rent increase and eviction ban issued on 6th September 2022, Cairn have been working hard in the background to obtain answers for landlords on how this will work in reality. We have received update today that The Cost of Living (Tenant Protection) (Scotland) Bill has now been published: Cost of Living (Tenant Protection) (Scotland) Bill 2022: overview – gov.scot (www.gov.scot) Overview of Bill The Scottish Government have produced this Bill, as it is believed that people who rent in Scotland are the most at risk of poverty due to the financial crisis. The emergency measures have been implemented to: Protect tenants with the cost of living crisis by stabilising housing costs Lessen stresses and impacts on the wellbeing of tenants by evictions being banned. Give tenants more time to find alternate accommodation when facing eviction Reduce unlawful evictions and also raise the level of damages paid to a tenant by the landlord if unlawfully evicted. If passed, the Bill intends to place an immediate ban on rent increase notices and a moratorium on evictions until at least 31st March 2023. Wording has also been included to allow legislation to be extended by two further periods of six months with Parliamentary approval. However, there is a requirement for legislation to be examined and reported on, every 3 three months to ensure that the Bill is proportionate and reflects the changing economic crisis. Rent increase ban The emergency legislation aims to set a permitted rate of rent increase, known as the ‘rent cap‘. The cap will be set to zero from 6th September 22 to at least 31st March 23. However, the Scottish Government do have the powers to vary this cap to take into consideration the economic crisis on a wider scale which we sincerely hope will be investigated, as it is not only tenants whom are struggling from the current crisis. The cap applies to any rent increase proposed on or after 6th September 22 and no rent increase can be issued whilst the cap of zero is in place. This legislation does not affect rent changes/increases between tenancies. The legislation does take into consideration the impact the cost crisis is having on landlords and has been updated to allow landlords to apply to a Rent Officer to increase the rent to cover some of the ‘prescribed costs‘ in the preceding six months. Prescribed costs are mortgage interest payments (for the let property) and landlord insurance (other than buildings or contents insurance) / service charges which the tenant is responsible for per the terms of the lease which the landlord has had to pay. The landlord will be required to provide evidence to the Rent Officer and where authorised, the landlord would be able to increase the rent by the lower of 50% of the increase in the ’prescribed costs‘ in the preceding six months, or 3% of the current rent level. Landlords and tenants will also have the ability to appeal the Rent Officers decision via the First-tier Tribunal for Scotland. Rent increases issued before 6th September 2022 It has been confirmed in the legislation that rent increase notices issued before 6th September 22, will still be enforceable after the required 3 month notice period to the tenant. However, tenants also has the right to apply to the Rent Officer to challenge any notices issued if they believe the increase has been set at an unfair level. Eviction ban The moratorium will stop enforcement action for induvial evictions over the next 6 months. However, safeguards have been implemented to allow enforcement of evictions in certain circumstances, these include: Cases of antisocial behaviour and criminal behaviour Cases of abandonment Substantial rent arrears (where at least 6 months worth of rent is owed at the point the eviction order is issued) Eviction applications submitted / orders issued before 6th September 2022 If an eviction order is granted before this legislation comes into force, or if a landlord has submitted an application for eviction with the Tribunal before the legislation comes into force, the case will not be affected by the moratorium. This also applies to an eviction notice issued to the tenant before 6th September 22 as these should still be enforceable in line with current legal requirements. Increases damages for unlawful evictions These changes have been implemented to discourage landlords from conducting unlawful evictions and if passed, seek to increase the award to tenants to the maximum amount of 36 months worth of rent. There is also a requirement being placed on the Tribunal to notify the relevant authorities (Police / local authority / landlord registration), that an order has been made against the landlord. With the ever changing legislation being implemented on private residential landlords, it is imperative that landlords employ reputable and qualified agents to manage their properties in Scotland. This will ensure legislation is being followed and that the most recent and correct advice on how to manage tenancies is being received. At Cairn, we have fully qualified and friendly staff waiting to assist landlords with management of their properties, we also have an in-house Compliance Manager who is both ARLA and LETWELL qualified to assist landlords with more difficult tenancy issues. Please do not hesitate to contact us to obtain further information on our management services.
Legislation, Buy To Let, Landlords, Property Investment
Tax Breaks for Landlords: Will Holyrood Follow Suit?
Tax Breaks for Landlords: Will Holyrood Follow Suit? It’s all change in the UK. We have a new Prime Minister, a new Chancellor, and a new (mini) budget. For landlords in England and Northern Ireland, the tax breaks described in Kwasi Kwarteng’s budget could represent tens of thousands of pounds in savings. But for their Scottish counterparts, it’s simply a case of waiting to see if Holyrood (the Scottish Government) follows suit. In this short blog post, we recap the mini-budget’s impact on landlords and share some thoughts on Holyrood’s potential response. How will the mini-budget affect landlords? In case you missed it, here are the main points from the mini-budget that’ll affect landlords: The basic income tax rate will be cut to 19p (from 20p) from April 2023. The 45% higher rate will be abolished and replaced with a single higher rate of 40%. Stamp duty land tax will be cut in England and Northern Ireland. The limit for buyers will be raised to £250k (from £125k) — or £425k for first-time buyers. The planned increase in corporation tax has been cancelled. It will remain at 19%. The planned rise in National Insurance contributions will be reversed from 6 November. According to an analysis by tax firm Blick Rothenberg in the Telegraph, the corporation tax rate remaining at 19% will save an incorporated landlord with £250,000 in rental profits £15,000 a year. Meanwhile, the change in Stamp Duty rates means landlords buying property worth up to £250k will have less to pay. Previously, buy-to-let investors had to pay a 3% surcharge on purchases up to £125k, and a further 5% on anything between £125,001 and £250k. Now it’ll be a straight 3% up to £250k, 8% between £250,001-£925,000, 13% between £925,001-£1.5m and 15% for anything £1.5m+. Example: Under the new rules, Stamp Duty for a property worth £249,000 in England will be £7,470, down from £9,950 under the old rules. However, much of this will not affect Scottish-based landlords The cut in additional rate income tax (from 45% to 40%) on earnings above £150,000 won’t apply in Scotland. The rate in Scotland will remain at 46% for the time being. Similarly, the cut in basic rate tax from 20p in the pound to 19p won’t be seen in Scotland. And the Stamp Duty cut will only apply in England and Northern Ireland. Scotland has its own system: Land and Buildings Transaction Tax (LBTT). The current LBTT rates mean buy-to-let investors need to pay a 3% surcharge on purchases up to £145k, 5% between £145,001-£250,000, 8% between £250,001-£325,000, 13% between £325,001-£750,000 and 15% for anything £750,001+. So, for a £249,000 property in Scotland, LBTT is currently £12,040 — a significant difference from south of the border. Will Holyrood mirror Westminster? That is the question. And right now, the answer seems to be “no.” The First Minister, Nicola Sturgeon, has heavily criticised the Chancellor’s decision to abolish the top rate of income tax and has hinted that she has no interest in “blindly following suit”. As it stands, the Scottish Government probably won’t make a final call on income tax rates until its draft budget is presented to Holyrood. We’ll be keeping a close eye on developments. If you’d like to get more posts like this in your inbox, sign up for our regular newsletter.
