Charging of Premiums in the Private Rented Sector - Analysis of Consultation Responses

1. Introduction

About this report

1.1 This report provides an analysis to the Scottish Government's "Consultation on the Charging of Premiums in the Private Rented Sector". The report provides a detailed analysis of each element of the consultation. It looks in detail at the responses to the consultation questions and provides an analysis of the views of particular groups, highlighting trends and issues where appropriate.

Background to the consultation

1.2 Letting agents play an important role in the private rented sector (PRS) in Scotland. The industry has been expanding as access to owner occupation becomes more constrained, and property owners become private landlords due to difficulties selling their properties. Letting agents support landlords by managing private rented property and help prospective tenants to access suitable accommodation. It is estimated that there are approximately 500 letting agents operating in Scotland. They are involved with around 150,000 private lettings in Scotland each year, representing half of the annual transactions in the sector^[1].

1.3 Although it was intended that existing legislation (Section 82 of the Rent (Scotland) Act 1984 and Section 27 of the Housing (Scotland) Act 1988) should prevent charges being applied to tenants (other than rent and a refundable tenancy deposit), there is evidence that a variety of additional charges are being made to tenants. This seems to result from a lack clarity regarding the definition of premiums.

1.4 When fully commenced, Section 32 of the Private Rented Housing (Scotland) Act 2011 will change the law on premiums in the private rented sector. Firstly it amends the definition of a premium so it is clear that a premium:

• is any fine, sum or pecuniary consideration other than rent and a refundable deposit (equivalent to no more than two months rent); and
• includes any service or administration fee or charge.

1.5 Secondly, Section 32 includes a new section 89A into the 1984 Act which provides Ministers the power to outline in secondary legislation charges that will be allowed in connection with the grant, renewal or continuance of a protected tenancy.

About the consultation

1.6 The consultation seeks views on three specific options:

• embarking on a consumer focused communications exercise to clarify the definition of a premium;
• developing secondary legislation which specifies categories of sums which are permitted to be charged for providing services to a tenant, with maximum allowable amounts for each charge; and
• developing secondary legislation which specifies categories of sums which are permitted to be charged for providing services to a tenant, without maximum allowable amounts for each charge.

1.7 The consultation included 22 questions, 15 of which related to the proposed options and the impact of proposals. The remaining seven questions related to annexes within the consultation document containing a draft Business Regulatory Impact Assessment and the draft Equalities Impact Assessment.

1.8 Respondents were able to provide either an open response or complete the consultation questionnaire, offering systematic responses to each of the consultation questions.

1.9 The analysis was undertaken using a response matrix. Respondents were categorised into stakeholder groups and responses were fed into the matrix in accordance with the answer to the consultation question. General and additional points that did not relate to the questions were fed into a separate section of the matrix and analysed manually.

1.10 Where a respondent chose not to answer the consultation questionnaire, the response was read thoroughly and where the respondent directly answered any of the questions, the comments were fed into the appropriate place on the matrix. Other substantive comments were treated separately as with other responses.

1.11 The analysis drew out the themes emerging within each of the questions posed and the range of views being expressed. It also highlighted any specific trends among stakeholder groups.