Scottish Tenancy Changes to Affect HMO Investment

New residential tenancy agreements will come into effect in Scotland in January 2018, bringing changes to tenancy lengths.

Lease agreements will then be on an indefinite tenancy instead of the original 6-month or 12-month minimum term as far as the tenant is concerned, allowing to give notice to vacate their property at any time by providing 1-month notice.

Landlords however will still be committed to honouring the initial fixed tenancy period of 6 or 12-months.

This legislative change will have the biggest impact on student (HMO) accommodation as it could lead to student properties coming available at times in the year when there is no market to secure replacement tenants.

The student property market obviously has a specific fixed calendar, so if a student leaves a property mid-term it could be difficult for the landlord to fill the space, leading to potential void periods.

Associate Director of DJ Alexander Property Managers, Rob Trotter, commented: ‘HMO properties are advertised well in advance to secure tenants for the next academic year.’

‘By binding tenants to fixed term leases we have always ensured no loss of income for landlords and avoided properties coming available out-with the annual academic cycle.’

‘Under the new legislation letting agents and landlords will not be able to ensure this anymore.’

Edinburgh for example has long been ideal for investors with a readily available source of tenants and demand outstripping supply. However, with this change in tenancy term due, coupled with the rise of higher spec purpose built student accommodation blocks, it is all the more important for HMO landlords to ensure their properties are up to scratch.

New furnishings can make a big difference at a relatively low cost. Larger works like redecoration or upgrading kitchens and bathrooms will further increase desirability and rental values and help attract more conscientious, respectful and longer term tenants.

The recent change stopping the 10 per cent per annum wear and tear allowance does at least mean that the cost of any improvements made to rental properties will be tax efficient.

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