Wed 02 Oct 2019

Student lets: are payments amounting to premiums now permitted?

Since the enactment of the Private Housing (Tenancies) (Scotland) Act 2016 which introduced Private Residential Tenancies (PRTs) in Scotland, it has generally been considered (due to an ambiguity in the legislation) that longstanding rules prohibiting the payment of 'premiums', under protected tenancies and the old short assured tenancy (SAT), continued to apply to all residential leases.

On closer analysis, it appears that the intention of the legislators was that the prohibition should no longer apply to those lets of student accommodation, by purpose built student accommodation providers (as distinct from by private individuals), which are not PRTs.

Prior to 1 December 2017,  when PRTs were introduced (with certain limited exceptions), essentially the law was that the landlord under a SAT or other protected residential tenancy could not require the tenant to pay anything other than:

•           rent, and

•           a returnable deposit.

All of the following would breach that rule:

•           administration charge,

•           service fee,

•           cleaning fee, and

•           inventory fee.

The prohibition originally applied to protected tenancies and was then later applied to SATs.

The 2016 Act abolished any new SATs (subject to limited exceptions) and created PRTs in their place  - and then expressly re-applied the premiums prohibition to PRTs.

A qualifying letting of student accommodation by a PBSA provider (which I'll call a "Qualifying Letting") is neither a SAT nor a PRT - rather it is simply a contractual tenancy.

To be a Qualifying Letting:

•           the let must be of the whole or part of a building planning permission for the construction, conversion or change of use of which was given on the basis that the let property would be used predominantly for housing students; and

•           the landlord is an "institutional provider of student accommodation".

For these purposes, the landlord is such an institutional provider if:

•           it lets, or is entitled to let, other properties in the same building or complex as the let property,

•           the let property and the other properties together include at least 30 bedrooms, and

•           the landlord uses, or intends to use, the other properties predominantly for the purpose of housing students.

The ambiguity is around what amounts to a "protected tenancy". If it means any residential letting, then the prohibition would still apply to a Qualifying Letting, which is a residential letting - even though it is not a PRT.

There is a technical argument that a 1988 Act, which sought to amend the 1984 Act which contained the premiums prohibition, was not worded in a way that achieved that result, i.e. it failed to do what it intended to do, resulting in the definition of "protected tenancy" being unchanged by it.

However, there is a very strong argument - which I favour - that despite the inadequacy of the wording used in the 1988 Act, the parliamentary intention was clear - and that Act did achieve its aim of disapplying the prohibition to new residential lets which were not surviving protected tenancies or SATs.

That being the case, on the coming into force of the 2016 Act - which abolished SATs and kept Qualifying Lettings outside the PRT framework - Qualifying Lettings were left simply as contractual tenancies which were not subject to the premiums prohibition.

Commercially, I would have thought it unlikely that the position of PBSA providers towards additional payments and charges will change much even if this interpretation of the legislation is favoured. This would represent an unpopular departure from the norm in what is a very competitive market. That said, it would appear that the option to do so does now exist.

It is of note also that, on this interpretation of the legislation, the prohibition on the collection of rents more than six months in advance would be similarly disapplied.


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