By Catherine Smith, Land Agent.
While the introduction of legislation around the new Private Residential Tenancy (PRT), testing standards, energy efficiency and maintenance, might have delivered greater security and benefits for tenants in private rented accommodation, it has also presented significant financial challenges for rural landlords.
The Private Housing (Tenancies)(Scotland) Act 2016 reformed the 30-year-old private rented sector tenancy by introducing the Private Residential Tenancy (PRT) for new tenancies commencing from December 1, 2017.
The PRT provides the tenant with more security of tenure while reducing the flexibility for the landlord to take the property back in hand.
This flexibility is absolutely key for some farms and estates that have ever changing requirements for housing for employees and retired workers.
In a nutshell it means that a landlord is no longer be able to ask a tenant to leave simply because the fixed term has ended. This has resulted in some landlords choosing to leave properties unoccupied rather than risk not having available accommodation for future key workers.
Another potential issue for rural landlords is the upcoming change to Energy Performance Certificate (EPC) standards. Although staggered, from March 2025 all let properties must have a minimum rating of band D, which will almost certainly require expensive improvement work to most, if not all, traditional rural properties.
While future-proofing the rural housing stock is certainly desirable it can present a significant challenge when imposed with a deadline for completion for all properties.
Most significantly, the Scottish Government announced late last year that farmhouses and other housing in agricultural tenancies will no longer be exempt from the standards that apply to other rented private rented housing.
Currently houses within these tenancies only have to meet the basic ‘Tolerable Standard’ but by March 2027, the higher ‘Repairing Standard’ will apply. The pressure to achieve the Repairing Standard criteria for properties in agricultural tenancies by 2027 may further drive estates away from letting houses privately, as funds that had been earmarked for getting privately rented properties EPC compliant by 2025 may now need to be diverted to upgrading farmhouses forming part of agricultural tenancies.
Against this backdrop of tighter legislation and rising costs, it’s not surprising that many rural landlords are considering their options. In some cases this means diversifying into holiday lets but I am also seeing estates moving out of the rental business altogether and selling their property portfolio, especially in situations where residential properties lie on the peripheral areas of the estate.
In some more concerning cases, Landlords are choosing to make houses uninhabitable, reducing liabilities for them lying empty when funds do not allow for the required improvements.
Worryingly, all these options have the same outcome of depriving the countryside of a locally-based workforce to drive the rural economy. And despite the obvious positives that come from stricter legislation around renting property privately, it may leave the rural areas of Scotland worse off in the long run.
Bell Ingram can provide help and guidance to navigate the raft of new legislation. There is no one solution that will work for all estates or farms and a full assessment of the surplus residential properties should be completed before making any decisions on the best way to move forward.
*Land agent Catherine Smith is part of the Rural Land Management team, undertaking a variety of work which includes all aspects of rural estate management and residential property management and lettings. If you require advice on Repairing Standard or any other aspect of rural housing contact Catherine Smith on 01738 621 121 or catherine. email@example.com
Article posted on 19/08/2019