The sun is out and the snow is melting as our vulnerable and elderly city residents are receiving their first vaccine. I cannot help but be hopeful that the coming spring will grant us a re-emergence from what has inevitably felt like a prolonged dark winter due to lockdown.
In my last blog we looked at the January lockdown’s impact on the letting market. While notices to leave properties continue to trickle in from both students and professionals, we are successfully starting tenancies at a similar rate. While many of our enquiries for HMOs are for summer availability, we have let HMO properties to mixed groups of students and professionals since Christmas.
As we sit on the brink of a new season it feels like a good point at which to review the changes COVID has brought upon legislation affecting the Private Rented Sector, including when temporary measures are due to end and which changes may be with us for the long term.
Minimum Energy Efficiency Standards
The Energy Efficiency (Domestic Private Rented Property) (Scotland) Regulations 2020 were due to come into force on 1st April 2020. Delayed due to the strain on local authorities caused by the coronavirus pandemic, we now expect legislation to come into being this year that looks to place a requirement on landlords to have their properties at a minimum band of D by 1st April 2022 for all new tenancies from that date. All properties will then have to meet band D by 31 March 2025.
Here at Cullen, we’ll be reviewing existing EPCs for affected properties over the course of this year and working closely with our EPC assessors to consider the benefits of specific improvements to produce a proposal for landlords on how to proceed toward lifting the rating if their property is in the minority of being E-rated or below.
LBTT Threshold Reduction
Any increase in LBTT generally causes sales market transactions to peak just prior to the effective date and 31st March 2021 looks set to continue this trend, despite lockdown being expected to continue in its current form well into April. 25% of our own staff team have moved home recently or will be moving before 31st March. This may be adversely affecting investors looking to purchase quickly as market competition is stringent at this time.
Rishi Sunak is expected to announce an extension of the present stamp duty holiday in England and Northern Ireland on 3rd March, keeping it in place until June 30th according to The Times. There’s pressure mounting on the Scottish Government to follow suit, however at this time the policy brief advises LBTT will return to normal levels on 1st April.
Extended Notice Periods
I’ve detailed previously the changes to notice periods introduced by the Coronavirus (Scotland) Act 2020 here. These changes were modified slightly in October to reduce notice periods in cases of anti-social behaviour, criminal conviction or abandonment. A full breakdown of present notice durations is available at mygov.scot. These altered notice periods are currently in force until 31 March 2021, however, following yesterday’s announcement by the First Minister, with the country moving to a hesitant ‘phase 3’ in April, we expect these extended notice requirements to be in place until at least 30 September 2021. If you think you may require vacant possession this year, either to sell or move back into a rented property, please discuss with your Property Manager as soon as possible so they can advise on grounds, notice periods and plan this in good time for you.
Pre-action Requirements for Notices after 7 April 2020 (Rent Arrears Cases)
The Coronavirus (Scotland) (No. 2) Act 2020 came into force on 27 May 2020. This laid out a series of actions required to be actioned by landlords or agents looking to evict on the grounds of rent arrears for any tenancy format. There are three key requirements that must be demonstrated before eviction proceedings can be raised at the First Tier Tribunal.
Firstly, landlords must provide clear information to tenants on the terms of the tenancy, the value of rent in arrears, the tenant’s rights and sign-posting for financial support during the crisis.
Secondly, landlords must make reasonable efforts to agree a payment plan thattakes into account the tenant’s expenditure, income and financial aid, as well as future rent payments. Essentially, this means that landlords or their agents must engage tenants in a budgeting exercise to work out what is reasonable and avoids the build-up of ongoing future arrears.
Finally, landlords must give consideration to the engagement levels of the tenant: to what end are they trying to remedy the situation and comply with any agreed repayment plan. Furthermore, on an ongoing basis, should changes to the tenant’s circumstances impact on the tenant’s ability to comply with an agreed payment plan, these have to betaken into account and essentially, there has to be a review of the plan and an opportunity to comply with the new iteration, before a landlord can finally proceed to requesting an eviction decree.
There’s some concern that this level of signposting and financial guidance of tenants in instances of arrears may become a permanent regulatory burden for those operating in the PRS once the Coronavirus Acts pass out of being.
At Cullen, your appointed Client Accounts Managers have been working diligently to assist tenants with advice and support when facing financial difficulty. These efforts, combined with the outstanding generosity of our landlords in providing relief to duly affected tenants means that as I write we havezero arrears. Almost a full year into the biggest crisis affecting the world since WWII, this is definitely something to celebrate.
So, where are we now? Well, vaccine invitations are falling through letterboxes, capital values in the city are strong and rising, businesses will hopefully start to re-open from April and students are planning to return to the city in the summer. Considering what could have been, we can cope with a few additional pieces of legislation. The outlook is after all getting brighter day by day.