News & Updates
Rent Freezes and a Ban on Evictions
On 3 October 2022, the Cost of Living (Tenant Protection) (Scotland) Bill was laid before the Scottish Parliament. The Bill faced a final vote on 6 October 2022 after being expedited as emergency legislation, which was approved by 89 votes to 27, and will now begin royal assent.
What is the aim of the legislation?
The Bill seeks to increase protection for tenants from rent rises and evictions during the cost of living crisis. It will put in place:
• a temporary cap on rent increases
• a temporary moratorium on evictions (a pause on enforcement of an eviction order or decree, similar to what was in place in response to the Covid-19 pandemic) except in a limited number of circumstances
• an increase to the damages which can be awarded in cases where a landlord carries out an unlawful eviction
The Bill is set to expire 31 March 2023 but provides for a further two 6-month periods in which it can be extended.
The Bill will cap rents at 0% – effectively freezing rents – backdating from 6 September 2022 until at least 31 March 2023. Private landlords may apply to a Rent Officer (part of Rent Service Scotland) to increase rent to partially cover a limited number of specific costs relating to the letting of the property including increased mortgage payments on the property, increase in property-related insurance, or increase in service charges. Landlords may only increase their rents to cover up to 50% of the increase incurred, and only in relation to increases incurred in the last 6 months. However, any increases relating to these exemptions are capped at 3%, and the existing rules on only raising rents every 12 months still apply.
The cap applies only to in-tenancy rent increases. The types of tenancy affected by the rent cap are:
• Existing private Residential Tenancies
• Existing assured tenancies
• Existing short assured tenancies
Tenancies which are not covered by the rent cap:
• Some assured tenancies where rent increases are governed by contract – if you have an assured tenancy where the way your rent will increase is set out and this provision on rent increase is still legally in force then your rent will be able to increase in the way agreed in the contract
• Regulated tenancies under the Rent (Scotland) Act 1984 – these tenancies already have strong protections in place, and rents for these tenancies can only increase once every three years
• Common law tenancies – this includes arrangements like agricultural tenancies and lodger agreements (where you live with your landlord)
• New tenancies –landlords can set the rent for any new tenancy and are allowed to put the rent up between one tenant moving out and the next tenant moving in
Ministers have power to vary the cap while the legislation is in force, and can extend the cap for a further two 6-month periods.
Enforcement of eviction actions resulting from the cost crisis will also be severely restricted except in a number of circumstances. Landlords can still serve a notice to leave or notice of proceedings, and Courts and tribunals can still make an eviction order, but the delay will be in the enforcement of the eviction order by Sheriff Officers. Further, enforcement of orders can only be delayed for a maximum of 6 months during this emergency period.
However, there are exceptions to the application of the legislation where:
• the tenant has engaged in antisocial or criminal behaviour (private and social sector)
• the tenant has abandoned the property (private and social sector)
• where the property is to be sold by a lender (private sector only)
• where a private landlord needs to sell due to financial hardship (private sector only)
• where a private landlord needs to live in the let property due to financial hardship (private sector only)
• where there are substantial rent arrears (private and social sector)
“Substantial rent arrears” are determined as:
1. for the private rented sector: the cumulative amount of rent arrears is equal to or more than the equivalent of 6 months’ rent under the tenancy.
2. for the social rented sector: the rent arrears are equal to or more than £2,250. (This amount is equal to or slightly more than 6 months’ average rent in the Scottish social rented sector).
What amounts to “financial hardship” for the landlord is not defined in the Act, but the context of the provisions suggests that the landlord would require to be able to provide evidence that he or she was in a position verging on insolvency, or at least in need of financial advice from a money advisor or debt advice service.
Damages for unlawful evictions during this period will also increase to a maximum of 36 months worth of rent. This will be done by a temporary amendment to the Housing (Scotland) Act 1988 to:
• replace the way damages for unlawful eviction are assessed, so that the calculation will be based on a multiplication of the monthly rent
• set the minimum and maximum level of damages that the Tribunal or, Sheriff Court in social housing cases, can award at a minimum of 3 times the monthly rent and a maximum 36 times the monthly rent
• place a new requirement on the Tribunal or Sheriff Court to inform the relevant authorities that a landlord has unlawfully evicted a tenant. The relevant authorities include the local authority landlord registration team, police or the Scottish Housing Regulator (if the landlord is a social landlord). This would allow these authorities to consider whether any further action should be taken in relation to the unlawful eviction
At the end of the emergency period, it is likely Landlords will look to increase their rent all at once. The normal procedure for rent adjudication is determined on the reasonable rent increase based on the open market value. In order to avoid unjust outcomes in rent review based on a soaring open market value and a significant differential with the existing (frozen) rent, the Act therefore allows the Scottish Ministers to make a temporary change to the existing rules setting out the basis on which rent officers or the Tribunal calculate the appropriate rent when the Act is about to come to an end. The intention here is to provide a softer landing for rents and to properly balance the interests of tenants and landlords..
Any regulations made under this power will be subject to consultation and will be made through normal parliamentary procedure. Parliament are looking to gather the views and concerns of stakeholders on this shortly.
This is an increasingly complicated and regulated area of law. If you wish advice in relation to rent freezes or obtaining and enforcing eviction orders then please contact John Grant (email@example.com) or Steven Docherty (firstname.lastname@example.org)
The information contained in this newsletter is for general guidance only and represents our understanding of relevant law and practice as at October 2022. Wright, Johnston & Mackenzie LLP cannot be held responsible for any action taken or not taken in reliance upon the contents. Specific advice should be taken on any individual matter. Transmissions to or from our email system and calls to or from our offices may be monitored and/or recorded for regulatory purposes. Authorised and regulated by the Financial Conduct Authority. Registered office: 302 St Vincent Street, Glasgow, G2 5RZ. A limited liability partnership registered in Scotland, number SO 300336.