Scottish Property – Cairn Legislation Update ( 9th November 2022 )

Cost of Living (Tenant Protection) (Scotland) Act 2022

Following our series of blogs on the rent increase and eviction ban, we can confirm that the Cost of Living (Tenant Protection) (Scotland) Act came into force on 28 October 2022. The legislation will be in force until at least 31 March 2023 and can be extended (with parliament agreement) to 30 September 2023 and again to March 2024.

Rent increase ban

Under the current legislation, any rent increase notices served on or after 6 September 2022 fall under the permitted rate cap of 0%. Meaning a landlord cannot increase a tenants rent on or after this date until the rate cap is either increased or removed.

The permitted rate cap does not affect increase notices issued to tenants before 6 September 2022, these are still enforceable under the legislation.

There are some options still available to landlords:

1. Landlords can increase the rent between tenancies.
2. Landlords can still increase the rent for Short Assured / Assured tenancies which have a rent increase clause within the lease. The cap does not affect rent increases for these tenancies, regardless of the date the increase was served if there is a rent increase clause within the contract.
3. Landlords can apply to the Rent Service Scotland for an increase up to 3% to cover increases in the ‘prescribed property costs’.

Prescribed property costs

Prescribed property costs per the legislation are:

• The interest payable on any mortgage or standard security over the rented property.
• Any insurance premium you pay which relates to offering the property for rent. For example, landlords’ insurance. Increases in premiums for building or property insurance are not included.
• Any service charges related to the rented property that the tenant pays towards as part of their rent if this was agreed between you and the tenant as part of the terms of the tenancy.

Landlords can apply to Rent Service Scotland to increase the tenants rent to recover up to 50% of the increase to the prescribed property costs above. This application can only be for prescribed costs in the last 6 months prior to the application being made.

If Rent Service Scotland is assured that the landlord’s prescribed property costs have increased within the last 6 months and that the increase proposed by the landlord represents no more than 50% of those costs, the rent officer must order a rent increase. The maximum increase in rent permitted through this process is 3%.

To apply to increase the rent landlords must complete the government application form, which can be found here: https://www.gov.scot/publications/rent-cap-private-landlord-guidance/documents/

Landlords are required to notify the tenant of their intention to increase the rent before the landlord form is submitted to Rent Service Scotland. The government has also provided wording for this notification which can be found here: https://www.gov.scot/publications/rent-cap-private-landlord-guidance/documents/

The rent increase comes into force 3 months and a day after the landlord issued notice to the tenants of the proposed increase.

This legislation has also been written into the Private Residential Tenancy agreement (PRT).

Eviction ban

Under the legislation, the issuing of notices to end the tenancy is not banned. Landlords are still free to serve notice to end the tenancy if they wish to do so. In most cases, tenants vacate the property during the notice period, it is only when the tenant does not vacate the property that the restrictions may come into effect.

If the tenant doesn’t leave at the end of the notice period, the landlord can still apply to the Housing and Property Chamber, First-tier Tribunal for Scotland for a formal eviction order. If and when the eviction order is granted, the legislation places restrictions on Sheriff Officers from enforcing this order and recovering the property for the landlord. The legislation states that evictions cannot be enforced until restrictions are lifted, or the order has been in force for 6 months, whichever is sooner.

There are some exceptions to this restriction, which are detailed below.

Exempt eviction grounds:

• The tenant is not occupying the Let Property as his or her only or principal home
• The tenant has a relevant criminal conviction
  The tenant has engaged in relevant antisocial behaviour
• The tenant has associated with a person who has a relevant conviction or has engaged in antisocial behaviour
• Let Property to be sold by the mortgage lender.
• The tenancy was granted to an employee and the Tenant is no longer an employee.

New grounds have also been included in the PRT under the legislation which are exempt:

• The Landlord intends to sell the Let Property to alleviate financial hardship.
• The Landlord intends to live in the Let Property to alleviate financial hardship.
• The Tenant is in substantial rent arrears (equivalent to 6 months’ worth of rent).

The above grounds also apply to Short Assured and Assured tenancy agreements, however the notice periods differ slightly per the terms of the lease.

Landlords need to provide evidence to the Tribunal of the eviction ground being used / demonstrate their financial hardship. These could include:

• a letter of advice from an approved money advisor, local authority debt advice service, independent financial advisor or from a chartered accountant.
• an ‘affidavit’ stating that you are intending to sell the let property or to live in the let property. This is a particular type of statement which is sworn under oath

There are other types of evidence which landlords can provide to the Tribunal to demonstrate financial hardship, such as:

• Information detailing your income
• Details of the things you are responsible for paying
• Any outstanding debts or payments which you need to make
• Information to show that you are not able to cover the essential things you have to pay for because you do not have enough money coming in
• Information to show that you are often unable to make any essential payments or repayments which you are required to make
• Information to show that you are having to borrow money in order to pay your bills
• Information to show that you are only able to make essential payments by selling things you own
• Information to show that you are on a formal debt management plan
• Information to show that you are bankrupt
• Information to show that you are unable to meet the costs of maintaining or repairing the let property to meet the standards you are required by law to meet as a landlord

The Tribunal will consider all relevant information in the case, including any evidence or information provided to them, and decide whether it is reasonable to evict the tenant.

For any eviction applications submitted to the Tribunal before 28 October 2022, these should still be heard as normal, and the eviction should be enforceable under the legislation as long as notice was served on the tenant prior to 6 September 2022.

Our qualified and knowledgeable staff at Cairn are always on hand to support landlords with any queries they may have regarding rent increases or evictions during this ban.

With the ever changing legislation being implemented on private residential landlords, it is imperative that landlords employ reputable and qualified agents to manage their properties in Scotland. This will ensure legislation is being followed and that the most recent and correct advice on how to manage tenancies is being received. At Cairn, we have fully qualified and friendly staff waiting to assist landlords with management of their properties, we also have an in-house Compliance Manager who is both ARLA and LETWELL qualified to assist landlords with more difficult tenancy issues. Please do not hesitate to contact us to obtain further information on our management services.