The private rented sector in Scotland has been highly regulated for many years. As part of this regulation both the Westminster and Scottish Governments have legislated as to the type of tenancy created when an owner rents a residential dwelling to a third party for use as that person's only or principal home. The "rules" relating to the leases created have varied over the years. This has resulted in there being a number of different types of tenancy currently in place affecting private rented houses in Scotland.
We have produced a note (which can be accessed here) setting out the different types of tenancy, the legislative regime which applies to them and a summary of their main features. In brief, however, a house let to an individual for use as that person's only or principal home will (subject to certain exceptions as noted below) be:
- a private residential tenancy if granted on or after 1 December 2017;
- an assured or, more commonly, a short assured tenancy if granted between 2 January 1989 and 30 November 2017; and
- a protected or regulated tenancy if granted before 2 January 1989.
Although there are common themes between the different leasing regimes – for example, all of the foregoing types of tenancy can only be ended on the grounds set out in the relevant legislation (with short assured tenancies having the added advantage that, if set up correctly, an owner can apply to obtain possession at the termination date set out in the lease) - each of the regimes is different and different rules apply in respect of each type of lease.
In order to work out what rights a tenant may have, therefore, it is important to understand the type of lease which is in place.
There are some leases which will not fall into any of the categories mentioned above – perhaps it does not form the tenant's only or principal home or insufficient rent is paid or it is one of the categories of tenancy excluded in the relevant legislation. In that case, the lease may be a common law or contractual tenancy where the relationship between the parties is governed by the terms of the contract. Arrangements can also be found where no rent is paid; in other words the owner allows a third party to occupy a property rent free. As payment of rent is a fundamental requirement of a lease in Scotland, such arrangements are referred to as Licences to Occupy. Again, it is the contract between the parties which governs the relationship.
Where an employee lives in accommodation provided by the employer, this can be either a lease arrangement (where rent is paid) or a licence arrangement (where no rent is paid). Such arrangements should be in writing and referred to in the contract of employment (or a Licence to Occupy tied to employee status) in order to ensure that the arrangement will come to an end on the termination of the employment.
Finally, it is worth noting that short term lets are now also regulated in Scotland. Planning permission may be required if the property is in a short term let control area and a licence in terms of the Civic Government (Scotland) Act 1982 (Licensing of Short Term Lets) Order 2022 will also be required.
So, when allowing a third party to occupy a property which you own, whether rent is paid or not, it is important to understand the arrangement being entered into and the legislation which applies.
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Senior Associate
