Scottish Rent Freeze – Advice for Buy to Let Owners
Owners of buy to let properties in Scotland are being advised to check their financial plans as rent freezes come into force in Scotland.
The Scottish Parliament has passed the emergency Cost of Living (Tenant Protection) Scotland Bill. The new legislation sets a 0% rate for rent increases until at least 31 March 2023. The freeze is backdated to 6 September 2022, meaning any rent increases imposed since that time have no legal effect.
Ministers have the power to extend the rent freeze until 30 September 2023 or 31 March 2024, as well as the power to end the measures early. The 0% cap for rent increases will be reviewed every three months to assess whether it remains necessary and proportionate.
The bill also prevents landlords from enforcing eviction orders, except in cases where the tenant has abandoned the property, engaged in criminal or anti-social behaviour or fallen six months behind on rental payments. Violation of these conditions could see landlords receive a fine equivalent to 36 months’ rent.
The bill does include a measure whereby landlords facing significantly increased costs for mortgage interest, landlords’ insurance or property service charges may apply for a rise in rent of up to 3%, to cover up to 50% of the increase.
Gerard Cumming, Mortgage and Protection Adviser at McCrea, offered this advice to holders of buy to let mortgages: “Buy to let properties have long been seen as an attractive investment option. While property can still offer a good long-term return, it’s more important than ever for owners and would-be owners to prepare detailed financial plans based on up-to-date market conditions. Mortgage lenders are making frequent changes to the products on offer and combined with the removal of the ability to charge increased rents, this could have a significant impact on the profitability of a buy to let property and your overall investment portfolio.
“We can help owners and those considering a buy to let property prepare a detailed financial projection and depending on their own financial planning considerations, assess how property investment compares to a full range of other investment options. We can also help current owners prepare the necessary documentation if applying to Rent Service Scotland for an exception to the 0% to account for increased costs.”
Whether you currently own a buy to let property and would like to understand how the rent freeze affects you, or if you’re interested in investing and want to know more about your options, our award-winning team are here to help.