Raising Rents: a Vital Consideration for All Scottish Landlords

Raising rents is like owning an investment property, a vital part of a landlord’s lot. It ensures a continuing return, provides funds to continue to maintain the property for the tenant’s benefit and hopefully aligns with the landlord’s strategy.

How much to raise rents by, and when is a trickier proposition, and it’s one that in Scotland, is subject to regulation and legislation.

Raising rents can also be a fundamental consideration when considering the purchase of a property with tenant in-situ, as the buyer may deem it necessary to increase the rent if it is currently well below market rates.

When can you increase rent in Scotland? How much can you increase it by?

As property professionals with a keen interest in both the broader buy-to-let market and in tenanted sales in particular, we’re aware of how important these questions are.

It’s our experience that many landlords err on the side of not increasing rent, often because they prefer reliable tenants to the cost and effort of replacing them. This tendency can have unintended consequences, as we’ll discuss later.

We’re going to look at the laws and regulations which affect these decisions in Scotland – other parts of the UK will have different regulations.Finally – none of this is legal advice, please consult your solicitor or accountant to discuss specifics.

The Law

The law in Scotland is very clear on the subject of raising rents; it was most recently laid down in the Housing (Scotland) Act 2025.

For tenants on a Private Residential Tenancy (PRT) – and that is the vast majority of tenants these days – landlords can only increase their rent once in every 12 months. Landlords cannot increase rent in the first 12 months of a new tenancy.

Moreover, landlords must give three months notice of any rent increase and it must be delivered to the tenants on the correct form. Failure to meet any one of these three conditions will nullify the proposed increase.

There is no cap on the amount of increase allowed, unless the property is affected by a Rent Control Area, of which there are none in Scotland yet. However, if your tenants feel the increase is excessive, they can appeal.

Tenants have 21 days at present to appeal to Rent Service Scotland requesting a review of the proposed increase. Rent Service Scotland has 40 days to decide whether the new rent should be lower or higher than that proposed.

There is therefore a risk for tenants who request a review that their rent could end up higher than the rise the landlord notified. This will change as of the first of April 2027.

From that date, reviews cannot recommend a rent higher than that originally notified by the landlord, and tenants will have 30 days, not 21, to refer their rent to Rent Services Scotland.

Market rents and why they matter

What is a market rent? We’re all guilty of throwing terms around assuming that everyone knows what we mean!

A market rent is defined thus:

“The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller… where the parties had each acted knowledgeably, prudently and without compulsion” 

In short, it’s the rent that a property would attract when compared with similar properties, in the same area and in similar circumstances.

As we mentioned in our introduction, we are aware that many landlords err on the side of rents which are below market rate, and they have good reasons for doing so.

• They may well have established a long-term relationship with their tenants, respect them and do not want to overburden them.

• They may be fearful of the cost of finding new tenants, and the possibility that any new tenants might be more problematic, causing the landlord additional stress.

• They may view their rental property as a long-term investment, expecting to realise increased value when sold to contribute to their pension or finance other investments.

• In such a case, the landlord may not actually be overly concerned about their month-to-month income from the property, their prize comes further down the road.

And there’s the rub. A property which is generating a rental income well below market rates can cause serious problems especially when the landlord finally decides to sell the property.

Failing to raise rents can cost a landlord

Whatever the reasons for running a property with rent below the prevailing market rate, we can attest to the fact that when the landlord comes to sell, this can cause problems.

Assuming that the landlord wants to sell the property with their tenants in-situ, the pool of potential buyers is limited to other landlords and property investors.

This pool of buyers are looking for one thing above all else – a viable business investment – and a property where a sub-market-rent is in place is not necessarily an attractive investment.

It’s possible that the seller will be lucky, and find a purchaser who, like them, is focused on the long-term goal of capital growth, and is also happy to have good tenants in pursuit of that goal.

Realistically, most potential buyers will be looking for both capital growth and regular, viable, income from the property.

This leads to a few possible outcomes:

Firstly the buyer decides not to purchase the property simply because they don’t want to deal with the potential hassle of substantially increasing the rent on the existing tenants.

Secondly, a purchaser decides that they will purchase the property, but their offer will reflect the relatively poor income generated by the property and may therefore fall short of what the seller hoped for, and possibly counted upon.

Lastly, the current landlord may decide their only viable option is to serve notice to quit and market the property on the open market.

None of these are great outcomes for anyone. The landlord fails to realise the full value of the property and tenants which has a negative effect on their life and expectations.

The tenants find themselves facing a steep increase in their living costs and decide to quit the property, creating additional work and cost for the buyer.

Alternatively they may decide to dispute the rent increase, and while this shouldn’t be a long, drawn-out process, they have the right to appeal any decision by Rent Services Scotland to the 1st Tier Tribunal.

There is no cost to tenants for pursuing this approach, however the new landlord may regard any time and effort required, rightly, as a cost to their business.

Advice from the property pros

The above is a thumbnail sketch of conversations we have with clients all too often, and it could all be avoided by careful management of rent over the years.

Our firm advice to any landlord is to ensure that they are charging the market rate for their properties, or very close to the market rate if they feel obliged to their tenants.

This requires them to keep a keen eye on the rental market in the area where their property is, and look to match that level of rent. Alternatively, local letting agents will be able to advise of the current market rate.

Based on that, landlords should work within the guidelines and laws covering raising rents to ensure that their property doesn’t fall far below that rate, levying annual increases to maintain that position.

Most tenants assume that their rent will rise over a tenancy, and while they’ll doubtless be grateful if it doesn’t, or rises by only a token amount, that’s an unexpected benefit to them, not expected.

Assuming the landlord has a good relationship with their tenants, they can discuss the whys and wherefores of regular increases and manage the tenants expectations.

Failure to maintain the rent can have serious consequences for the landlord, and their tenants, when it becomes time to sell the property.

In summary…

For a landlord, maintaining the rent at a competitive but comparable level with similar, surrounding properties is an obligation they should take more seriously than many do.

It’s an obligation to themselves in terms of return from their investment, and it’s an obligation to their tenants if the landlord harbours serious hopes of passing good tenants onto another landlord when they sell the property.

As we move into 2027, tenants will have even less to lose if they decide to reject a proposed rent increase, and landlords have to be aware of this. At present if a tenant decides to refer a rent increase to RSS, they can find that they have to pay more.

From next year, that won’t be the case, the worst outcome for them is having to pay the rent increase proposed by the landlord. With no real cost to them, we shall have to wait and see if more tenants decide to challenge increases.

To avoid all of this, and it is mostly avoidable, making sure that tenants understand that they will see regular rental increases, even if circumstance dictates that they aren’t substantial, is vital.

Not all properties will attract large increases in market rate rents, and landlords may decide it’s not worth the hassle. As we’ve hopefully made it clear, ensuring that rents match similar rents locally makes great financial sense.

If you have questions arising from this article, or you’re considering selling (or buying) a tenanted property, we would be delighted to sit down and talk through your options with you.

Thanks for reading! As with many subjects, we’ve just scratched the surface here, hopefully you’ve found it helpful and thought-provoking.

Written by Ross MacDonald, Director of Sales & Cofounder of Portolio

Get in touch on 07388 361 564 or email to [email protected]