The announcement gives privately-run purpose-built student accommodation (PBSA) the same status as student accommodation offered by colleges and universities under the Private Housing (Tenancies) (Scotland) Bill, which is currently before the Scottish Parliament. It follows lobbying from the property industry and a report by the parliament's Infrastructure and Capital Investment Committee, which had warned that the new form of security of tenure would prevent these properties from offering fixed-term lets to students.
Property law expert Russell Munro of Pinsent Masons, the law firm behind Out-Law.com, said that the bill as originally drafted "could have had a seriously detrimental impact on the student housing sector in Scotland".
"It is great to see the Scottish Government taking on board the property industry's concerns on this, with the result that they will be excluding student accommodation from the ambit of the bill," he said.
The Private Housing (Tenancies) (Scotland) Bill was published on 7 October 2015 and proposes the introduction of a new 'private residential tenancy', which would apply to all future private sector tenancy lets. Once in force, the new law would limit rent increases to only one per year with three months' notice, give local authorities the ability to impose rent controls in areas where there are "excessive" increases in rent and modernise and streamline the grounds under which a landlord can repossess residential property.
One of the most contentious provisions in the bill is the removal of the existing 'no fault' ground for repossession, which currently allows a landlord to repossess its property once a short assured tenancy (SAT) comes to an end. A SAT is the Scottish equivalent of an English assured shorthold tenancy (AST), and only gives the tenant security of tenure for a fixed period of not less than six months. Removing the 'no fault' ground for repossession would prevent student landlords and tenants from entering into term-time leases, giving landlords no guarantee that the student would vacate the property at the end of the summer term.
The original draft of the bill explicitly stated that tenancies of student accommodation offered by universities and other educational establishments "cannot be private residential tenancies".
Responding to the Infrastructure and Capital Investment Committee's report (12-page / 277KB PDF), the Scottish Government said that PBSA was not part of the mainstream private rented sector and therefore "should not be treated as such for the purposes of the Bill".
"Therefore, [the Scottish Government] will bring forward an amendment that will have the effect of exempting PBSA premises from the Bill in the same way as applies already to accommodation provided by Higher and Further Education Institutions," it said. "Among other things, this will ensure that PBSAs can continue to provide accommodation for students through nomination agreements."
The bill will now return to the Infrastructure and Capital Investment Committee for further 'stage two' consideration.