New rules for landlords in Scotland will come into force in the next few days, with the Cost of Living Crisis Act emergency legislation freezing residential rents and restricting residential evictions.
Here’s our summary of the Cost of Living (Tenant Protection) (Scotland) Act 2022, including how the policy will work in practice, and the impact on landlords and tenants.
Cost of Living (Tenant Protection) (Scotland) Act 2022 – the background
On 6th September the First Minister announced new rules for landlords in Scotland,with an immediate freeze on rent increases and a ban on evictions. She noted that emergency legislation would be introduced due to the cost of living crisis, aiming to support tenants.
Shortly after the announcement, the Scottish Association of Landlords met with Patrick Harvie (MSP, Minister for Zero Carbon Buildings, Active Travel and Tenants’ Rights) however the government were unable to provide any clarity on how the policy would work in practice.
Last week emergency legislation to bring in restrictions on evictions and rent increases, entitled the Cost of Living (Tenant Protection) (Scotland) Bill, was debated by parliament and we now finally have the detail on how the new rules for landlords in Scotland will work.
Cost of Living (Tenant Protection) (Scotland) Act 2022
The Act will come into force in the next few days and is expected to be in force until at least 31st March 2023. With the agreement of parliament, the legislation can be extended beyond this date to 30th September 2023 and again to 31st March 2024.
As expected, the Act introduces restrictions on rent increases and evictions during the time it is in force.
What are the new rules for landlords in Scotland?
Restrictions on rent increases
In most cases a cap of 0%, termed the “permitted rate”, will apply to a rent increase notice served on or after 6th September 2022. The government has the power to modify the cap percentage.
A landlord who wishes to increase the rent in the future will not be able to issue a rent increase notice until the permitted rate is raised above 0% or removed.
Exceptions to restrictions on rent increases
There are some limited circumstances in which rent increases above the permitted rate can still take place:
- Landlords are permitted to raise the rent between tenancies. It is only mid-tenancy increases which are affected by the rent increase restrictions.
- Rent increase notices issued for any tenancy type prior to 6 September 2022 are permitted to come into force at the end of the notice period.
- For assured/short assured tenancies which have rent increase clauses within the contract, rent increases are permitted to take place regardless of whether notice of the rent increase is issued before or after 6th September 2022.
- Landlords can apply for an increase of up to 3% to cover increases in prescribed property costs – see more below.
Increases in prescribed property costs
Landlords can apply to a rent officer at Rent Service Scotland to increase the rent in order to recover up to 50% of the increase in any prescribed property costs incurred by the landlord in the six months prior to the application being made.
Prescribed property costs are:
- Mortgage/standard security interest
- Insurance premiums (not general buildings/contents insurance premiums)
- Service charges paid by the landlord which the tenant is responsible for under the tenancy
We are still waiting for details on how the application process to the rent officer will work.
Following their application, the landlord must issue the tenant with notice in writing advising they have applied to the rent officer for an increase. This notice must set out what the proposed rent is, giving details of the prescribed property costs which have increased.
Restrictions on evictions
Landlords can serve notice as normal if they wish to end a tenancy. Most tenants leave during the notice period and in these cases the eviction restrictions will not have any effect.
If the tenant doesn’t leave during the notice period, the landlord can apply to the tribunal for an eviction order as normal. However, the legislation delays a landlord from enforcing an eviction order issued by the tribunal, in some circumstances for up to six months.
Tribunal eviction applications which commenced before 6th September 2022 are unaffected, and orders issued can be enforced by sheriff officers as normal.
Tribunal eviction applications which commenced before the Act comes into force are unaffected if notice was served on the tenant prior to 6th September 2022. Eviction orders issued can be enforced by sheriff officers as normal.
Any eviction applications which commence after the Act comes into force are affected by the restrictions. Eviction orders issued by the tribunal cannot be enforced until the restrictions are lifted or the order has been in force for six months (whichever is sooner) unless the order is granted on an exempt ground.
Grounds for exemption – Private Residential Tenancy (PRT) evictions
Private Residential Tenancy (PRT) evictions are exempt on several grounds, including new grounds (numbered below) which the legislation adds to the PRT regime.
Private Residential Tenancy (PRT) evictions are exempt if the eviction is for:
- Criminal or anti-social behaviour
- Lender repossession
- Abandonment
- Employment with landlord ceasing
- 1A – intent to sell to alleviate financial hardship
- 4A – intent to live in property to alleviate financial hardship
- 12A – substantial rent arrears (six months or more at the point notice is served)
The notice periods for the new grounds are:
- 12A: 28 days
- 1A and 4A: 84 days if the tenant has been in the property for more than six months. 28 days if the tenant has been in the property for six months or less.
The notice to leave template will be amended by the government shortly to add in the new grounds.
Grounds for exemption – Assured/short assured tenancies
Assured/short assured tenancy evictions are exempt if the eviction is for:
- Criminal or anti-social behaviour
- Lender repossession
- Employment with landlord ceasing
- 1A – intent to live in property to alleviate financial hardship
- 8A – substantial rent arrears (six months or more at point notice is served)
These new grounds both require 2 months’ notice.
Industry Response
We acknowledge that those who rent their homes are more likely to be financially vulnerable than those who own property. However, we are disappointed that the legislation does not balance the need to protect tenants and the cost pressures that landlords are experiencing.
The Scottish Association of Landlords (SAL), are actively representing the concerns of landlords and put forward amendments to the bill to reduce its scope and impact. Although these were debated in parliament, they were not approved by MSPs.
SAL chief executive John Blackwood has made their position clear, stating that the SNP and Green Party have put political rhetoric ahead of achieving real improvements in Scotland’s housing sector. Rushed, ill-thought-out legislation such as eviction bans and a rent increase freeze, compounded by mortgage interest rate rises, are all making it harder than ever to be a landlord in Scotland. The government is causing, or at the very least exacerbating, a housing crisis.
What now?
SAL is now considering the detail of the bill that has passed. The association is also taking legal advice on whether a legal challenge to the legislation has a reasonable prospect of success.
As members of SAL, we will continue to provide feedback to them on behalf of our landlords and tenants. This will help contribute to SAL’s continued robust representation of the private rental sector.
For now, we will continue to work with landlords and tenants to try and keep good tenants in their homes for as long as possible. Please remember that we are here to guide and support you through these new rules for landlords. Just get in touch with us if you have any concerns or queries – no question is too small.
Give us a call on 0131 229 4001, email via our contact form or pop in and see us at 39 Warrender Park Road, Edinburgh, EH9 1EU.