Emergency legislation introducing a rent cap and a temporary moratorium on evictions until 31 March 2023 has now become law.

The Cost of Living (Tenant Protection)(Scotland) Bill received Royal Assent on 27 October and will become law as the Cost of Living (Tenant Protection)(Scotland) Act 2022 from 28 October. 

It follows the First Minister's statement to the Scottish Parliament on 6 September in which she introduced her “Programme for Government” for the coming year.

In the programme, the Scottish Government indicated that they intended:

“to introduce emergency legislation to protect tenants by freezing rents and imposing a moratorium on evictions until at least 31 March 2023.”

They also stated they would act to prevent immediate rent increases.

On 6 October the Scottish Parliament debated and passed the Cost of Living (Tenant Protection) (Scotland) Bill.

In this blog we will refer to the new law as “the 2022 Act”, and we will explore the impact of this Act on the social housing sector. 

Read more: What Does the Cost of Living (Tenant Protection)(Scotland) Act Mean for Landlords?

Rent freeze

The 2022 Act introduces a rent cap for specified residential tenancies. The manner of imposition is the amendment of the existing Acts which deal with the different types of tenancies in all sectors.

In the social rented sector, the 2022 Act amends the Housing (Scotland) Act 2001 by the insertion of a new section 24A into the 2001 Act.

The impact of that new provision is that the landlord under any Scottish Secure Tenancy (whether SST or Short SST!) cannot increase the rent payable under the tenancy by more than the “permitted rate”

The “permitted rate” is stated in the Act to be 0%.

Any notice to increase rent is of no effect if the notice is given after 6 September 2022 and at a time where the permitted rate is 0%

The rent cap will initially be in place until 31 March 2023. The Scottish Government can extend that period for a further initial period of six months to 30 September 2023 and has the power to extend it even further from 30 September 2023 to 31 March 2024. They also have the power to amend or remove the cap earlier than 31 March 2023.

The impact of this provision is that any notice of a rent increase given by any RSL on or prior to 31 March 2023 will have no effect. Given that the current legislation also requires at least 28 days’ notice of any rent increase that means that no RSL rent can effectively rise before 29 April 2023.

During the debates in the Scottish Parliament the various representative bodies lobbied the Scottish Government to indicate the impact that a rent cap would have on RSLs.

In Scotland, most RSLs have an annual rent review process and any approved rent changes take effect from April each year. The reviews follow a consultation process which is required by statute. The Scottish Housing Regulator has indicated to RSLs that they should continue with the normal consultation process relating to the annual review process over the coming months.

During the passage of the Bill, attempts were made to lodge amendments which would have had the effect of allowing rent increase notices to be effective if served before 31 March 2023 but which only took effect if and when the rent cap expired or was withdrawn. This firm assisted in the preparation of suggested amendments.  These amendments were not successful but the effort made by the housing groups has ensured that clarity will now be provided early next year relating to the likely impact of the rent cap beyond April.

The 2022 Act contains a clear undertaking that the Scottish Government will consider whether they should use the powers in the Act to remove the rent cap provisions prior to 31 March 2023 to allow social landlords to proceed with the normal rent review procedures.

There is a specific provision in the Act that the Scottish ministers must prepare a report of a review of the impact of the Act. That report must be lodged with the Scottish Parliament no later than 14 January 2023.The Scottish Government must indicate  whether they propose to

• retain the permitted rate at 0%, or
• increase the rate or
• make appropriate regulations to provide for the earlier expiry or suspension of the rent cap.

Accordingly, RSLs will know in mid-January 2023 whether the normal rent review process will proceed or the full extent of any limitations on it.

The clear advice to all RSLs at this time is to proceed with their normal rent review processes. They should conduct the normal consultation with tenants and tenant organisations and to be prepared to proceed once clarity is obtained in mid-January. It is hoped that the Scottish Government will listen to the representations being made by the sector about the impact of this rent cap continuing beyond the end of March 2023.

Eviction moratorium

During the initial pandemic restrictions, the Scottish Government introduced a moratorium on evictions over the winter period of 2020/2021. There were exceptions for evictions based on anti-social behaviour and criminal convictions.

The eviction moratorium provisions in the 2022 Act will apply to decrees granted

• in proceedings raised after the Act comes into force (28 October 2022) and
• to decrees granted in proceedings raised before that date based on an eviction notice served on or after 6 September.

The eviction moratorium will therefore not impact any action where the proceedings were raised prior to 6 September nor will it affect any action raised prior to 28 October 2022 if the eviction notice itself was served prior to 6 September 2022.

The moratorium, like the rent cap, will initially be in place until 31 March 2023. It can also be extended for periods of six months should the Scottish Government choose to do so.

The manner of application of the eviction moratorium will be a prohibition on the enforcement of the decree for a period of six months beginning on the day on which the decree is granted. If the eviction moratorium is lifted earlier than that date, then the decree will become enforceable. As an example, if a decree was to be granted on 14 November 2022, it will not be able to be enforced until 14 May 2023 unless the moratorium is lifted prior to that date

While the moratorium is in place the time period in the existing law relating to the maximum period during which decree can be enforced (six months or such other period a set by the court) will be suspended.  

The eviction moratorium will not apply at all where the following eviction grounds are being used:

• ground 2… conviction for certain offences
• ground 5… tenant absent or not occupying house
• ground 7. antisocial behaviour or harassment
• ground 8... antisocial behaviour or harassment with alternative accommodation being offered
• ground 10… demolition of or substantial work on the property
• ground 14… islands council as education authority recovering house for use by teacher.

More significantly, there will also be an exemption in respect of actions based on Ground 1 involving rent arrears. This exemption will only apply in cases where the rent arrears being claimed in the decree are equal to or greater than £2250.

The inclusion of ground 10 in the list of exemptions was a direct result of a suggestion made by this firm and based on evidence and information provided by us.

The exceptions to the eviction moratorium are relatively wide and arguably include almost all eviction actions normally contemplated by social landlords.

Conclusion

The announcement relating to the introduction of this emergency legislation caused significant concern to those practising in the social rented sector. It may well transpire that the ultimate effect of the rent cap will be fairly limited in this sector (although that remains to be seen)

The impact of the eviction moratorium similarly may also not prevent the small number of cases where RSLs fully pursue eviction proceedings. There is nothing in the 2022 Act that should cause any RSL to amend its current processes relating to housing management and its use of recovery proceedings

We will continue to monitor the impact of the Act and will keep clients fully advised of its impact on ongoing court actions.

Should you require any advice please contact our team