Update – Rent Freezes and a Ban on Evictions – Extended Protections for Tenants

In October 2022, the Cost of Living (Tenant Protection) (Scotland) Act was introduced as emergency legislation. The Act makes provision in connection with protecting residential tenants from increases in rent and eviction. The legislation was due to expire on 31 March 2023, but the Scottish Government has recently announced their intention to extend the legislation to 30 September 2023.

An Overview of the Legislation

The Act was intended to protect tenants from rent rises and evictions during the cost of living crisis. It 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 Act was set to expire on 31 March 2023 but provided for a further two 6-month periods in which it can be extended. The Scottish Government has decided to exercise the first of these extensions, so the legislation will now expire on 30 September 2023.

See our article from 18 October 2022 on the introduction of the legislation for more information here: https://www.wjm.co.uk/news/rent-freezes-and-a-ban-on-evictions

Changes to the Current Measures From 1 April 2023

Subject to the approval of the Scottish Parliament, there will also be some changes to the legislation which makes it slightly more landlord friendly:

• The Act capped rents increases at 0% of total rent, effectively freezing them. From 1 April 2023, landlords will be able to increase private rents with a new cap at 3%.
• Landlords will continue to have the right to apply to Rent Service Scotland to increase rent by a maximum percentage amount to at least partially cover specific costs relating to the letting of the property - including increased mortgage rates, service charges, and insurance (although, subject to the overall cap on increases, landlords may only increase their rents to cover up to 50% of the extra charges they incur, and only in relation to such extra charges incurred in the last 6 months). The legislation had capped these increases in rent at 3%. From 1 April 2023, the cap will increase to 6%, with the existing rules on only increasing rents every 12 months continuing to apply.
• From 1 April 2023, student accommodation will no longer be covered by the rent cap in recognition of its limited impact on annual rents set on the basis of an academic year.

The cap continues to apply only to in-tenancy rent increases, meaning that a landlord is free to set a new rent for a new tenancy, at whatever level he or she wishes, once an existing tenancy comes to a valid end. The types of tenancy affected by the rent cap are:

• Existing private Residential Tenancies
• Existing assured tenancies
• Existing short assured tenancies

Tenancies which continue not to be covered by the rent cap:

• Some assured tenancies where rent increases are governed by contract – if there is an assured tenancy where the way the rent will increase is set out in the contract and is still legally in force, then the landlord will still 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 the tenant lives with his or her landlord)
• New tenancies – as noted above, 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
• Student accommodation – will no longer be covered by the rent cap from 1st April 2023.

Eviction Enforcement

Enforcement of eviction orders will continue to be prevented except in a limited 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. Enforcement of orders can only be delayed for a maximum of 6 months during this emergency period.

The same exceptions to the application of the legislation still apply, so in cases where:

• the tenant has engaged in antisocial or criminal behaviour (private and social sector)
• the tenant has abandoned the property (private and social sector)
• the property is to be sold by a lender (private sector only)
• a private landlord needs to sell due to financial hardship (private sector only)
• a private landlord needs to live in the let property due to financial hardship (private sector only)
• there are substantial rent arrears (private and social sector)

the landlord can still implement an eviction order.

For this purpose, “Substantial rent arrears” are determined as:

1. for the private rented sector: a cumulative amount of rent arrears which is equal to or more than the equivalent of 6 months’ rent under the tenancy.
2. for the social rented sector: rent arrears which are £2,250 or above. (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.

Unlawful Evictions

Damages for unlawful evictions will continue to be set at a maximum of 36 months worth of rent through the temporary amendment to the Housing (Scotland) Act 1988.

Rent Adjudications

At the end of the emergency period, it is likely that many 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, it is expected that, as allowed by the Act, the Scottish Ministers will make a temporary change setting out the basis on which rent is calculated when the legislation expires. We await consultation on this.

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 (jg@wjm.co.uk) or Steven Docherty (sd@wjm.co.uk)