New rental legislation from the UK and Scottish parliaments are already having a knock-on effect in the buy-to-let sector by deterring many people from investing further in properties. It is having an effect on landlords throughout the UK, potentially leading to fewer rental properties, which would only exacerbate the housing crisis.

Buyers in Scotland who own property have had to pay a 3% Additional Dwelling Supplement, similar to the stamp duty levy on second-home owners in England. Research by Aberdein Considine, a firm offering estate agency, legal and independent financial advice services, shows that nearly two-thirds of homeowners will not invest in a second home because of ADS. This has weakened demand for properties in some Scottish areas by flooding the market with stock. In part, this is what the government wanted – more properties on the market for first-time buyers. What politicians still fail to grasp is that property prices are still putting ownership out of reach of many workers and, simply, some people do not want the burden of a mortgage and home ownership.

In Scotland, buyers also have to pay the Land and Buildings Transaction Tax. As if that wasn’t enough, mortgage relief is being withdrawn. Previously, this allowed higher-rate taxpayers to offset the interest payments on their buy-to-let mortgages against their tax bills. These three factors, along with increased regulations and licensing, seem to be putting off new landlords, encouraging others to sell up and preventing more investment in the rental sector.

In Scotland, there is another factor taking its toll. The new Private Residential Tenancies law came into effect on December 1 last year, and this which an end to fixed-term tenancies. The contracts are open-ended and landlords cannot ask a tenant to leave after they have lived in a property for six months, as they could under short-assured tenants. Now landlords have to give at least 84 days’ notice to quit if the tenant has lived in the rental property for more than six months. Tenants, on the other hand, only have to serve 28 days’ notice after they’ve moved in. Rents can only be put up once every 12 months and by giving three month’s notice. Tenants can also complain to the new Housing and Property Chamber if they believe the increase is unfair. These open-ended leases have their uses. Tenants can feel more settled by knowing they are not going to be asked to leave within a short time. This gives them additional security. Potentially, landlords with decent properties should also feel confident that tenants will be in it for the long haul and will not have to keep advertising for new tenants with the potential of void periods too. However, the notice to quit periods do seem to be heavily weighted in the tenants’ favour.

Calls are being made for indeterminate tenancies to be introduced in England and Wales. The Resolution Foundation is among those calling for an end to short-term leases, along with linking rent rises to CIP inflation for periods of three years.

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