Tenants’ rights in Scotland: what do recent reforms mean for Scotland’s private renters?
By Malcolm Combe, posted on 14 December 2022
The SNP-Green administration at the Scottish Parliament has been active in relation to the rights of residential tenants in Scotland since it assumed office. There is even now a (suitably eclectic) nominate ministerial role for such rights, with Patrick Harvie MSP acting as Minister for Zero Carbon Buildings, Active Travel and Tenants’ Rights.
Others in the Scottish Parliament are also actively travelling towards increased rights for tenants, as can be seen from a recent exchange between Mercedes Villalba MSP (Labour) and the aforementioned Patrick Harvie at Holyrood. Their discussion in the Chamber about Housing (Private Sector Rents) from 24 November 2022 (taken from the Official Report) is set out in full here:
Mercedes Villalba (North East Scotland) (Lab)
To ask the Scottish Government what action it is taking to address high private sector rents.
The Minister for Zero Carbon Buildings, Active Travel and Tenants’ Rights (Patrick Harvie)
The Cost of Living (Tenant Protection) (Scotland) Act 2022, which came into force on 28 October, included a rent cap to protect tenants from high rent increases.
Alongside that, we are committed to introducing an effective national system of private sector rent controls by the end of 2025, and to doing so in a robust way that provides lasting benefit to tenants. We are also providing up to £86 million-worth of housing support this year, building on the £39 million-worth of additional funding that has already been provided to protect tenants as a result of the pandemic.
I thank the minister for his support for Labour’s rent-freeze policy. It is vital that that stays in place until we have a national system of rent control to bring rents down, because long-term underinvestment in council housing and the history of poor regulation of the private rental sector has allowed private landlords to cash in on the housing crisis while claiming that they provide a public service. Let us be clear: that is not philanthropy—it is exploitation. Will the minister commit to finally ending the two-tier system of rented housing in Scotland by capping private rents in line with social rent levels?
I am glad that the Labour Party supports the measures that the Scottish Government brought to Parliament, which have not been replicated by any Government in any other part of the UK.
The member is well aware that emergency legislation must, by definition, be temporary and that its on-going necessity must be reviewed to ensure that the provisions remain proportionate to the situation. For that reason, the measures will initially apply for a six-month period. However, the act also includes powers to extend the measures for two further six-month periods, subject to parliamentary approval, if circumstances show that to be necessary. The act also includes provisions to temporarily change the rent adjudication process if that is necessary to support the transition away from the emergency measures.
Those measures, alongside the direct support that I mentioned in my first answer and the Scottish Government’s strong track record on providing social housing, demonstrate that the Scottish Government has the best track record of any Government in any part of the UK in supporting tenants in these difficult times.
That chunky extract was provided in part so that there can be no danger of misrepresenting what was said, but it also serves as a useful introduction to what has already happened, and what might happen in the future. If Labour, the SNP and the Greens are all pulling in the direction of further fortification of tenants’ rights, there will be the numbers in Parliament for a law to be passed. No doubt this is a topic that will be returned to.
Also relevant to contemporary private renting is something that was not even mentioned in this discussion, namely a statute that made previous temporary measures brought in as a response to the Covid-19 pandemic the baseline position for Scots law. As I will explain below, Scottish private renters are no longer vulnerable to mandatory eviction when particular facts can be established, and instead a tribunal must assess whether an individual eviction is reasonable in its circumstances.
This blog post will digest these recent changes, signpost to further resources, and offer some commentary about what might happen next. Please note that the discussion here does not focus on social renting: the first of the 2022 statutes does not at all relate to situations where there is a local authority or housing association landlord, and whilst the second of those statutes does temporarily affect social renting such affects are not considered here.
The first 2022 statute – Recovery and Reform
The first of the 2022 statutes to consider is the Coronavirus (Recovery and Reform) (Scotland) Act 2022, which received Royal Assent on 10 August 2022. A fuller analysis of it can be found in an article I contributed to the August issue of the Journal of the Law Society of Scotland.
Since December 2017, almost all new private sector tenancies where someone moves into accommodation that is to be their main residence will be a private residential tenancy; normally abbreviated to “PRT”. The Private Housing (Tenancies) (Scotland) Act 2016 is the governing statute for PRTs.
The introduction of the PRT meant so-called “no fault” evictions were no longer possible. This is in direct contrast to the situation with fixed-duration short assured tenancies of six months or more, governed by the earlier Housing (Scotland) Act 1988. (Tenancies of that nature were allowed to continue and such tenancies that have continued since 2017 are still met in practice. For ease this post will focus on PRTs) Instead of having a set duration, a PRT subsists until either: a) the tenant brings it to an end, on 28 days’ notice; or b) the landlord brings it to an end, on the basis of a recognised eviction ground (found in Schedule 3 of the 2016 Act) established before the First-tier Tribunal (Housing and Property Chamber) (the “FtT”).
Even the reference to “no fault” evictions is slightly misleading, given that some of the grounds in the 2016 Act as first enacted could apply even where the tenant was in full compliance with the terms of the lease; where, for example, a landlord wished to move into the let property to make that their home or where the landlord wished to sell the property. These “mandatory” grounds contrasted with “discretionary” grounds, where the FtT was able to consider the overall reasonableness of granting eviction.
For present purposes, it is interesting to note that the 2016 Act regime actually contained more mandatory grounds for possession than the 1988 Act regime; this was a feature rather than a bug, acting as something of an offset to the introduction of open-ended PRTs, so any move away from mandatory grounds represents a clear change. Such a change first took place for emergency reasons little more than two years after the 2016 Act came into force.
The Coronavirus (Scotland) Act 2020, the emergency legislation passed by the Scottish Parliament as an immediate response to the pandemic, and some other legal measures made what were envisaged to be temporary changes to the law around private renting in Scotland. This removed any mandatory eviction grounds. For PRTs, this meant that the FtT could only make an order if a) one or more of 18 possible eviction grounds existed (as usual), but also b) where the FtT felt it was reasonable in all of the circumstances. That is to say, ten situations found in Schedule 3 of the 2016 Act that were previously mandatory were made subject to a reasonableness assessment and as such at a tribunal’s discretion. Another change, from the Coronavirus (Scotland) (No.2) Act 2020 and related Regulations, required private sector landlords involved in eviction proceedings relating to rent arrears to take additional steps and engage in dialogue with a tenant before raising an action at the FtT.
As initially drafted, the legislation envisaged these and other measures to end in September 2020, but there were built-in extensions to March 2021, and September 2021. Both options to extend were utilised, and then a further extension was legislated for. The modifications to mandatory evictions and pre-action stipulations for rent arrears eventually continued until 30 September 2022, at which point the Coronavirus (Recovery and Reform) (Scotland) Act 2022 carried forward those measures from 1 October 2022 on a decidedly non-time-limited basis.
Once again, the Recovery and Reform Act changes all the private renting regimes that can be encountered in Scotland, largely tracking the emergency legislation that preceded it. Important questions such as whether a society’s emergence from a pandemic provides the appropriate time to diminish a private landlord’s rights to recover possession from a tenant, or whether such a reform is justified more generally when someone faces losing their home, will be side-stepped here. Instead, I will now turn my attention to the more recent statutory reform.
The second 2022 statute – Cost of Living
On 27 October 2022, the Cost of Living (Tenant Protection) (Scotland) Act 2022 received Royal Assent. This latest residential tenancy reform operates to restrict rent increases and narrow the circumstances for securing eviction. Further consideration of this 2022 Act can be found in my article in the November issue of the Journal of the Law Society of Scotland.
Like the Coronavirus (Scotland) Acts, this was passed as an emergency bill enacting time-limited changes, with two possible extensions built into the scheme. The so-called rent freeze and evictions moratorium (the links are to briefings by the Scottish Parliamentary Information Centre, which adopts this terminology) are programmed to end on 31 March 2023, which failing 30 September 2023, which failing 31 March 2024 (although other dates are possible under regulations).
Given the inherent transience of this 2022 Act, it may seem unnecessary to offer this the same level of scrutiny as the abovementioned Recovery and Reform Act. That may be so, but the provisions are interesting in and of themselves and, given elements of a previous temporary reform found their way into a future baseline position, these measures may yet inform a future journey. With that in mind, a comparative nod can be made to France, where the trêve hivernale applies to bring about a partial eviction ban (or truce) over the winter.
The Act has retrospective effect from 6 September 2022, the date when the rent freeze and eviction moratorium were first aired in the Programme for Government. This means that rent increase paperwork properly served by landlords before 6 September can take effect, but papers served since then will be subject to the Act.
For matters on or after that date, rent increases and evictions are regulated but not completely ruled out. The eviction measures will be considered below. The first thing the covered in the Cost of Living Act is rent, so I will consider that first.
Rent controls whilst the Cost of Living Act is in force
Both the private and social sectors – and indeed student residential tenancies, from an educational provider landlord or an owner of purpose-built student accommodation – are caught by the legislation in various ways. To focus on the modern PRT regime, it provides that from 6 September 2022 the landlord under a PRT may not increase the rent payable by more than the permitted rate. That rate is set at 0%, thus no rental increases are possible unless regulations substitute a different percentage. Ministers must review the permitted rate relatively soon in the social sector, but not in the private sector. Absent such regulations, any rent increase notice given on or after 6 September is of no effect.
Subsequent amendments to the 2016 Act suitably constrain the rent variation provisions when the permitted rate is 0%, or modify them to (for example) stay a rent officer’s hand when it comes to ordering any increase when the permitted rate is more than 0%. A curious effect of the temporary scheme is that it removes the theoretical possibility of a rent officer reducing the rent after a landlord seeks an increase and a referral is made. This appears to be a pragmatic attempt at keeping the overall scheme fair to landlords.
The permitted rate of increase is not the full story. By a new s 33A, a landlord may apply to the relevant rent officer to increase the rent in a PRT by more than the permitted rate, in order to recover up to 50% of the increase in any “prescribed property costs” incurred during the “relevant period”. “Prescribed property cost” is relatively tightly defined, to include: (a) interest payable in respect of a mortgage [sic] or standard security relating to the let property; (b) an insurance premium (other than general building and contents insurance) relating to the let property; and (c) service charges paid by the landlord for which the tenant is responsible (in whole or part). “Relevant period” means the six months immediately before the day on which the application is made. “Mortgage” means absolutely nothing in Scots property law and should not have been included in the statute, but I digress.
Finally in relation to PRTs, the never used provisions on rent pressure zones (2016 Act, s 38) are suspended. These are not needed with this new scheme in play. Given the potential for further rent control to immediately supersede this emergency regime, it seems rent pressure zones are now a dead letter.
One other thing that the Cost of Living Act provides for is a possible regime relating to the determination of private sector rents. It does this by setting out matters to be taken into account, matters to be disregarded, and assumptions to be made in any future regulations. Such regulations may also end the possibility of a tenant challenging a notice and then finding that the adjudicated rent is higher than the landlord asked for in the first place. That seems sensible, although it might also lead to landlords aiming high in a notice, knowing there is no chance of getting anything higher. Rent setters would need to be wise to this.
Eviction whilst the Cost of Living Act is in force
Next, the Cost of Living Act restricts the effectiveness of decrees for removing from 6 September 2022, including decrees obtained but not yet actioned. This restriction applies until either (a) the expiry of six months from the day on which decree was granted, or (b) the expiry or suspension of the restriction in accordance with the Act.
There are some exceptions to this suspension though. Specific eviction grounds from existing regimes may apply, notwithstanding what has loosely been termed a moratorium. For PRTs, these grounds include: the existing grounds of property to be sold by lender, tenant no longer being an employee, tenant not occupying let property, criminal behaviour, antisocial behaviour, and association with a person who has a relevant conviction or engaged in antisocial behaviour; and the new grounds of landlord intention to sell the property, or to live in the property, to alleviate financial hardship, and substantial rent arrears.
While these latter grounds are technically new, they can be fairly described as existing grounds on steroids. The existing grounds relating to a landlord’s plans for the property, already subject to a reasonableness test, are now made subject to a financial hardship criterion, properly evidenced (by, for example, an affidavit from the landlord, or letter of advice from an approved money adviser, local authority debt advice service, independent financial adviser or chartered accountant).
Being in rent arrears for three or more months would normally be an eviction ground. The Act now asks for “substantial rent arrears”, defined as a situation where cumulative arrears equate to, or exceed, the equivalent of six months’ rent when notice to leave is given to the tenant. For information, in the social sector substantial rent arrears is set at £2,250.
Another eviction-related reform in the Cost of Living Act is an amendment to the statutory unlawful eviction regime contained in the Housing (Scotland) Act 1988. Currently the amount of statutory damages is the difference between the value of the landlord's interest with the residential occupier in occupation and the value with vacant possession at the time occupation ceased. Under the new formula, an award is to be made of between three and 36 months’ rent, the court or tribunal taking into account the manner of the unlawful eviction and the impact on the tenant. This is broadly in line with a law reform campaign of the Legal Services Agency, albeit they proposed a minimum of six rather than three months’ rent: their full response to what they characterise as a watered-down reform can also be found in the November issue of the Journal of the Law Society of Scotland. Separately, a new notification regime has been introduced, such that relevant regulatory bodies and the police must be informed of any award related to unlawful eviction. The separate wrongful-termination order regime that can apply when a tenant, or tribunal, is misled into thinking that a PRT should be brought to an end when in fact the landlord was not entitled to recover possession, with its penalty of up to six months’ rent, has not been amended. Wrongful-termination orders were considered in an earlier Strathclyde Law Blog post.
In my most recent note for the Journal of the Law Society of Scotland, I observed that landlord and tenant rights have been seesawing for many years. The prospect of additional weight being added to the tenant end of that seesaw has been clear since the last Scottish Parliament election. These new measures continue that trend, and as can be further evidenced by the conversation at Holyrood quoted above more permanent legislation about rent control may yet be swapped into position.
It has been reported that four groups with an interest in the provision of private sector lettings in Scotland are seeking a legal opinion on whether the Cost of Living Act might amount to a breach of landlords’ rights under Article 1 of the First Protocol to the ECHR. It is not possible to consider whether such a challenge could or should succeed here, save to note two quick points. First, this was considered in a Policy Memorandum that accompanied the Cost of Living (Tenant Protection) (Scotland) Bill. There, it was noted that the Scottish Ministers considered that the various safeguards catered for alongside the rent freeze and eviction moratorium “strike an appropriate balance between the landlord’s rights in the property and protection of the tenant from rent increases and eviction during the ongoing cost crisis” and were accordingly “proportionate”. Second, owing to the Scottish devolution settlement a successful challenge to the scheme in part or in whole would mean offending provisions are not law (as demonstrated in the rural land occupation case of Salvesen v Riddell  UKSC 22, with reference to section 72(10) of the Agricultural Holdings (Scotland) Act 2003). Human rights should be a big deal anyway, and they certainly are when it comes to devolved law-making. There is much at stake here.
To draw this post to a conclusion, it can be noted that 2022 has proven to be an important year for statutory reform of the residential tenancy sector. The Coronavirus (Recovery and Reform) (Scotland) Act 2022 made significant changes to the main letting vehicle in Scotland, despite being secreted in a miscellaneous statute with a short title that offers no clue as to this effect. The second 2022 Act is not so discreet: the Cost of Living (Tenant Protection) (Scotland) Act 2022 burst onto the scene with a suitably clear and tubthumping short title. In theory, it is supposed to be but a temporary visitor. If it beds in though, some or all of its provisions may yet find an extended residency in Scots law, and the example of France demonstrates that eviction restrictions can sensibly operate over the winter. As to what happens next, that human rights challenge and the prospect of further reform means we must wait to see what pans out. The only thing we can be sure of is that there will be further changes for residential tenancies in the future.
In addition to the two JLSS articles referred to in this blog post, further background to the topics discussed here can be found in Malcolm M Combe, “The Scottish response to the Covid-19 pandemic in the private rented sector” in Zsa-Zsa Temmers Boggenpoel, Elsabé van der Sijde, Mopho Ts’episo Tlale and Sameera Mahomedy (eds) Property and Pandemics: Property Law Reponses to Covid-19 (2021, Juta) (open access version at https://pureportal.strath.ac.uk/en/publications/the-scottish-response-to-the-covid-19-pandemic-in-the-private-ren), and in Malcolm M Combe, “Shifting grounds for private renters in Scotland: Eviction after the Coronavirus (Recovery and Reform) (Scotland) Act 2022 and during the Cost of Living (Tenant Protection) (Scotland) Act 2022” 2022 Jur. Rev. 222.