The Scottish Government has now officially launched its much awaited Rental Income Guarantee Scheme (or RIGS for short) for the Build to Rent, Private Rented Sector (development) market in Scotland.

The Scottish Government concluded through collaboration with the Scottish property industry that in order to foster investor confidence in this sector and deliver on the potential for growth in Scotland, a government-backed guarantee initiative was needed. Accordingly, RIGS now sees the Scottish Government sharing some of the void risk and non-payment risk in respect of rental income.

The following paragraphs highlight the most pertinent aspects of the Scheme but they are not intended to be an exhaustive summary of the operational mechanics of RIGS. For fuller advice and analysis please contact Nick Scott or your local Brodies contact.

The Scottish Futures Trust has been appointed by the Scottish Government as its agent and commercial manager to manage the delivery and implementation of RIGS.

The term of each guarantee is intended to endure for a five year period, but three year guarantees are also available on the same terms and conditions.

The guarantee legally commences on the date that the Manager/Scottish Futures Trust notifies the Scottish Government that all of the Eligibility Criteria (referred to below) have been satisfied.

Each applicant has a period of 24 months from signing of the guarantee to satisfy the Eligibility Criteria, failing which the guarantee shall terminate with immediate effect.

Each successful applicant (named a Beneficiary under the guarantee) must be an "Approved Owner " which means that it must be (a) an appropriately regulated corporate entity or partnership which is not a Prohibited Person (persons or bodies engaged or having substantial interests in (i) the production or sale of products containing or deriving from tobacco; (ii) the manufacture or sale of arms or weapons (iii) the pornography industry, or (iv) subject to or the target of economic sanctions or trade embargoes, or (b) any funder or its affiliates , trustees or representatives, or (c) otherwise agreed by the Scottish Government to an Approved Owner.

Each development or phase of development for which the application is made, must contain "Eligible Units" which are owned by the Approved Owner.

"Eligible Units" means units which are owned by the Approved Owner and at all times satisfy the following criteria ("Eligibility Criteria"):

  • The Beneficiary holds a good and marketable title to all of the Units in the relevant phase of the development;
  • The development or relevant phase of the development has been completed and does not include affordable housing;
  • The development or relevant phase consists of not less than 30 units which shall not include any element of affordable housing;
  • The Beneficiary has provided the Manager and the Scottish Government with a valid signed collateral warranty from the Employer's Agent employed in connection with the relevant phase;
  • All units are either furnished or unfurnished and in good and substantial repair and either occupied or ready for immediate occupation and use as residential property;
  • All units benefit from Services and Amenities (services and amenities paid for by the core rent);
  • Payment for the provision of Services and Amenities has been assessed as rental income and no additional charge or the provision of such services will be levied against any tenant; and
  • The Beneficiary at all times shall comply with the Representations and Warranties set out in the guarantee.

In terms of the actual guaranteed sums, the Scottish Government has understandably sought to cap and limit its exposure. The maximum amount which can be claimed by a Beneficiary under the guarantee and enduring over the lifetime of the guarantee shall not exceed a figure which represents ten per cent (10%) of the aggregate of the annual rental income forecasts in each year of the guarantee.

On an annual basis, the amount which shall be paid out by the Scottish Government is dependent upon the following void thresholds:

  • Where the actual annual rental income in any given year is less than 100% of the annual rental income forecast ("ARIF") but greater than 95% of ARIF, there shall be no pay out.
  • Where the actual annual rental income is less than 95% of ARIF but greater than or equal to 75% of ARIF, then the guaranteed sum paid out shall be equal to 50% of the difference between (a) 95% of the ARIF for that year and (b) the actual annual rental income received for that year.
  • Where the actual annual rental income is less than 75% of the ARIF, the guaranteed amount paid out shall be 10% of the ARIF.

For example in a development of 30 Eligible Units:

Year ARIF Actual Annual Rental Income Actual Annual Core Rental Income as a % the ARIF Guarantee Amount



£216,000 60% £36,000


£432,000 £396,000 91.67% £7,200


£519,400 £504,000 97.22% £0

The Guarantee does attract a charge and therefore a fee is payable by each Beneficiary on an annual basis. The fee will be set as a percentage of the ARIF (1.22%) for each year of the term of the Guarantee and paid annually on the anniversary of the commencement date of the Guarantee. An initial deposit of 25% of the first year's fee is paid upon signing of the Fees Agreement which forms part of the guarantee. This is deductible against the fee charged for the first year.

Other key points to note are as follows:

  • The Beneficiary may terminate the guarantee at any time on giving one month's written notice subject to certain qualifications, such as payment of outstanding fees.
  • There are certain Event of Default grounds which, if breached and continuing, will entitle the Scottish Government to unilaterally terminate the guarantee.
  • Upon the disposal or sale of the relevant development or phase of development, and all Eligible Units within such phase, the Beneficiary may transfer its rights and obligations under the guarantee, provided that the new owner qualifies as an Approved Owner.
  • The Beneficiary shall at all times be permitted to constitute an assignation in security over its right title and interest in the guarantee in favour of any funder involved in the provision of debt finance secured against the phase in question.


RIGS is a key component of a wider set of measures to encourage the growth of BTR in Scotland. The specific aim of RIGS is to provide the developer and their investors with greater confidence during the initial/ early stages of occupation when the risk of suffering voids is likely to be at its highest. The anticipated value of the fund has not yet been published by the Scottish Government but once the funds which have been earmarked are exhausted the scheme will be closed. Therefore the message is clear: apply as soon as possible if you or your investors are interested in taking up the opportunity presented by RIGS.


Johane Murray

Head of Real Estate & Partner

Helen Abrams