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Scotland has been at the forefront of introducing radical changes to the PRS and most recently announced is the introduction of a rent cap.

Tenant fee ban in Scotland

Scotland introduced the banning of tenant fees in 2012, with England due to follow suit after the 2016 budget announcement (although it’s implementation date is still being debated). The ban means that landlords and letting agents cannot charge tenants any fees related to processing their tenancy, including fees for referencing, paperwork, credit checks or renewal fees.

What did this do to rents in Scotland? Research from Shelter, the housing charity, in 2014 revealed that just 2% of landlords had increased rents in light of the fee ban. By comparison, renters in England have faced a 9% increase over a 4 year period from ONS data. This is disputed by some Scottish letting agent groups, who claim that rents in Scotland have risen as a direct result of the fees ban, a House of Commons select committee found the evidence to be inconclusive. Many letting agent groups in England are strongly opposing the introduction of a fee ban, claiming it would only lead to increased rents for millions of tenants.

Rent caps in Scotland?

Legislation was passed last year by the Scottish Parliament to begin the process of introducing rent caps. It is due to come into effect in December 2017 and would designate certain areas as ‘Rent Pressure Zones’. The Green Party in Scotland is pushing for the entirety of Edinburgh city to become an RPZ as the whole capital is affected by high and increasing rents. In an area designated as an RPZ, landlords would be allowed to put rents up but they would be limited to an annual rise of inflation plus one percent.

What are the issues with rent caps?

Other than rent caps being introduced in emergency situations, such as war, modern rent caps generally fall into two categories.

The first is seen in Berlin, where rents are limited to within 10% of a regional guide price. The second is tenancy rent control, which means rents can only be freely increased between tenancies and not during. In Berlin, the rent cap did initially lead to lower rents but reports from 2016 suggest it is no longer working because of the lengthy and complicated process of a tenant taking a landlord to court for not adhering to the rent cap. Rents are now beginning to rise again as landlords become aware that the policy is difficult to enforce.

Will England introduce rent caps?

Although the plans to introduce RPZ areas in Scotland are not due to start until December 2017, the PRS in England should be keeping a close eye on what happens. As with the tenant fee ban, although there are contradicting reports as to its effectiveness, a positive improvement in Scotland’s PRS due to rent caps could lead to England following suit.

At Upad, we keep fees lows for landlord and tenants. Find out how we can help you let your property.

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By Lucie Geller
21 Jul 2017

Categories: News, Property Management, Buy to Let

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