Rent increases likely in Scotland

December 20, 2012

Landlord Information

For some time, there has been controversy over the role of letting agencies and related landlord expenses charged to tenants.

The basic issue is one that will be familiar to many established landlords.

At the present time, the theory of a typical let involves the payment of a deposit and subsequently the rent.  Yet in some cases, both landlords and letting agents have been making ancillary charges for activities such as taking inventories, performing searches and occasionally engaging in viewings etc.

This practice has never been popular with prospective tenants but was the method by which landlords typically recovered the costs they might have incurred when letting a property, including those associated with paying their letting agents.

In Scotland, news has come* that the Scottish government is to put a stop to this and make it illegal to ask tenants to pay for anything other than the deposit and rent.

As a report indicates, this is resulting in a very predictable increase in rental costs, as landlords simply look to recover the costs they have incurred through letting agents by increasing the amount of rent they charge to their tenants.

As a result, it is not entirely clear what this legislation is likely to achieve.

Arguably, it may simplify the lives of tenants a little by meaning they only have to think about one set of charges but on the other hand, the attempt to recover agency fees through increased rents might lead to the temptation to sneak additional increases in at the same time – meaning an overall higher than necessary rise in rental rates.

If it simplifies things a little for tenants, it might have the opposite effect on landlords and potentially complicate their relationship with their letting agents. If increased rents also lead to further tenant arrears, the position is likely to become even more complicated, particularly given that typical landlord insurance quotes do not cover the reimbursement of arrears of rent that cannot be recovered.

Overall, the decision might best be described as fluid and the end result perhaps not entirely what the Scottish government intended.

This is not the only discussion underway at the present time relating to increased legislation and controls on private landlords.  Some have commented that the attention being given to this sector of the economy seems entirely disproportionate to the problems within it and some may question why similar attention seems to be lacking in other economic areas such as banking and energy prices etc.

It is an interesting question and one that many landlords will no doubt continue to ask!




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