The ongoing cost of living crisis has a significant, ongoing impact on the residential tenancy sector in Scotland. In October 2022, the Cost of Living (Tenant Protection) (Scotland) Act 2022 ('the 2022 Act') introduced two controversial restrictions for landlords:- (1) the eviction ban and; (2) the rent increase cap (set at 0%).
These restrictions were designed to offer assistance to tenants facing financial hardship. The restrictions were initially due to end on 31st March 2023; however, they have now been extended by a further six months until at least 30th September 2023. There seems to be the possibility of a further six-month extension beyond that.
Notwithstanding these restrictions, there are ways in which landlords may be able to increase the rent or seek an eviction order sooner than later.
Existing residential tenancies will see an increase to the current rent cap. The level of rent increase permissible has increased from 0% to 3% from the 1st April 2023, with the possibility for landlords to apply to the Rent Service Scotland to boost the increase to 6%.
This is to help cover certain increases in costs incurred by the landlord however only in limited circumstances. For example, the Rent Service Scotland could consider factors such as increased mortgage rates, insurance, or service charges.
Landlords with Short Assured Tenancies and Assured Tenancies which contain rent increase clauses will experience a benefit, as such clauses typically allow rent increases out with the rent cap restrictions.
Therefore, different rules apply to different types of tenancies, and it is of utmost importance to check which rules apply to the potential rent increase notice.
It is worth noting that the current rent cap does not apply to newly created tenancies. Therefore, landlords are entitled to create new tenancy agreements and we are seeing landlords giving very careful consideration to the level of rent being charged where a new lease is granted.
Landlords can continue to serve appropriate notices and the First Tier Tribunal for Scotland (Housing and Property Chamber) (“the Tribunal”) can still grant eviction orders. However, evictions in a residential sphere continue to be subject to a “ban” for the most landlords. This means that landlords cannot enforce the order once successfully obtained.
There are circumstances and new grounds which landlords can rely on for lease termination and/or Tribunal proceedings, that are not bound by the eviction moratorium:
- The tenant(s) engaging in antisocial behaviour or criminal behaviour;
- The tenant(s) abandoning the let property;
- The let property being sold by a lender;
- Landlord(s) selling the let property due to alleviate financial hardship;
- Landlord(s) requiring the let property for their own residence, due to financial hardship; and
- Substantial rent arrears (being equal to, or more than, 6 months’ rent).
Each of these grounds contains high evidential thresholds which must be established to allow the Tribunal to grant the order on that basis. It is also vitally important the notice to terminate the lease contains the correct ground(s).
Landlords that unlawfully evict their tenants (on the basis of a wrong termination ground) risk paying damages of up to 36 months’ worth of rent. Therefore, every landlord should carefully consider the grounds for lease termination and seek legal advice accordingly.
What can we do for you?
We are currently advising a number of landlords on the options available to them where they are looking to recover possession of the property, rent arrears and/or increase the rent.
Please contact Elaine Elder or Karolina Naglik to find out more.