How will the new Private Residential Tenancy (PRT) affect student lets in St Andrews?
Short Assured Tanancies (SAT) are now a thing of the past in Scotland with the introduction of the new Private Residential Tenancy (PRT) regime. This will have a far-reaching impact for landlords who currently let to students in St Andrews.
How will PRTs affect Student Landlords in St Andrews?
- No fixed term – The new Private Residential Tenancy will be open ended. The tenant and landlord won’t be able to agree a fixed duration for any lease. There will be no end date on the new PRT tenancy agreement. If you run your property as a holiday let in the valuable summer months, you won’t be able to force students out. Imagine this in 2021 when St Andrews hosts The Open Championship.
- Removal of the ‘no fault’ ground for repossession – landlords won’t be able to end the tenancy unless one (or more) of the 18 grounds for possession can be applied. Some examples of which are: the landlord wishes to sell; the lender wishes to sell the property; the landlord intends to refurbish the property; the landlord wishes to live in the property for over 3 months. The tenant may now appeal all decisions at a First Tier Tribunal, causing delays.
- Rent increases – rent can only be increased once every 12 months and tenants must be given three months’ notice. Tenants can also contest rent increases if they believe them to be unfair.
- 28 days notice – the tenant is able to give notice to vacate the property any time after the start date of the lease. The tenant is only required to give 28 days notice in writing. This could be in the middle of a term, thus leaving the property vacant.
- Rent Control – councils can declare some areas Rent Pressure Zones (RPZ). If a local council believes rents are rising by too much in their area, causing issues for tenants and putting pressure on the council to provide housing (or subsidise the cost of housing), they can ask the Scottish Goverment to designate the area as a RPZ. A rent cap will be set in that area for up to five years of at the consumer price index (CPI) +1%.
What are the alternatives to Student Lets in St Andrews?
Furnished Holiday Lets (FHL)
The changes in legislation across the UK mean furnished holiday lets are a great way to make your property work for you. There are a number of tax and practical advantages of having a furnished holiday let over a student let.
Advantages of Holiday Lets
- Mortgage interest relief – many buy-to-let owners in St Andrews will continue to be impacted by the rolling mortgage interest relief. The phased restriction will eventually limit mortgage relief to the basic rate of tax. Essentially meaning significantly larger tax bills for higher and additional tax payers. As a FHL is a trading business, it would not be subjected to such restrictions.
- Capital Gains Tax – holiday let properties qualify for a number of capital gains tax exemptions and reliefs that would not normally be available to buy-to-let investors. The most significant of these is perhaps Entrepreneurs’ Relief. This can reduce the rate of capital gains tax on the sale or gift of an FHL property to 10%.
- Furnishings – the cost of furnishings within a qualifying furnished holiday let in St Andrews can be written off for tax purposes against rental profits. Eligible items would include furniture, white goods and other movable items. Once again, these deductions would not be available to a buy-to-let investor.
- Other Reliefs and Benefits – Profits from FHLs are not subject to National Insurance Contributions and are pensionable earnings for the purposes of pension contributions.
- Income – you can potentially make a much greater return on your investment in high demand areas such as St Andrews.
- Flexibility – whilst there are occupancy conditions to be met, use of the property is much more flexible. It avoids the uncertainty of the new Private Residential Tenancy (PRT) regime in St Andrews.
Difficulties with Holiday Lets
- Occupancy Conditions – for a property to quality as a furnished holiday let in St Andrews, your property must be available for letting as furnished holiday accommodation letting for at least 210 days in the tax year. You must let the property commercially as furnished holiday accommodation to the public for at least 105 days in the year. Please click here for HMRC’s guidance.
- Finance – whilst the landscape has been changing recently, it has historically been difficult to obtain financing on furnished holiday let properties in St Andrews due to the income profile i.e. potentially higher income but possible seasonal periods of vacancy.
- VAT – HMRC views furnished holiday lets as a “trade” and not a simply buy-to-let investment i.e. it requires active running a business. This means that revenue is liable for VAT when the threshold is exceeded. It’s unlikely that small property owners will exceed the VAT threshold unless there are multiple properties.
- The “Hassle” – Buy-to-let investments are generally pretty easy and hassle-free. Running a holiday let business can be time-consuming and tricky. This can be the case if you don’t know have a good knowledge of the holiday let platforms. You would also have to do turnarounds and laundry. Guests would need to be dealt with constantly. A local holiday let manager such as Short Stay St Andrews would make the process “hassle-free”.
Benefits of Using a Holiday Let Manager
- Local Knowledge – Experienced managers such as Short Stay St Andrews know the local market and are able to give you advice on what will work and what income levels are achievable.
- Technology Know-how – Listing your property on the well-known holiday platforms is a tedious and tricky process. You want your property to gain the widest exposure at the right price, which requires the best photos and profile descriptions. Short Stay St Andrews will take care of all of this for you.
- Maintenance – local businesses such as Short Stay St Andrews will have their local trade contacts to deal with any issues as they arise. Remember we are always only 10 minutes away from St Andrews town centre.
- 10 Minute Rule – it’s important to always have someone 10 minutes away to deal with any issues with guests or the property as they arise.
Short Stay St Andrews are experienced in all aspects of holiday let management with years of experience. We have over 1000 5 star reviews and have completed over 5000 turnovers. We are within one mile of the centre of St Andrews and are also active in the East Neuk of Fife. Click through to find out more or call Jordan on 07803926862. Our Airbnb Made Simple management will make letting your property hassle-free.