The new Housing (Scotland) Bill: what’s next for Scotland’s residential tenants?
By Malcolm Combe - Posted on 29 May 2024
Legal commentators tend to avoid the polemical when engaging in analysis. No-one wants their astute critique to be dismissed as hyperbolic. Occasionally though, an opportunity presents itself that is simply too irresistible and the shackles can come off.
Scotland is in a housing emergency: that’s not my view, it’s the view expressed by the Scottish Parliament in May 2024. Holyrood has now followed where some of Scotland’s local authorities (such as Argyll and Bute Council and City of Edinburgh Council) initially dared to tread. Others away from the elected sphere have also been voicing concerns about housing in Scotland and the wider UK for some time. Suffice it to say, this is serious. How this manifests from person to person and place to place can be very different, but there are people all over the country who are finding it difficult to get on the property ladder, or scraping by to meet existing rent demands, or struggling to secure suitable rental accommodation, or indeed being left with nowhere suitable to stay.
No-one sensible is going to pretend that you can simply legislate your way out of a housing crisis. The legal regime for housing is clearly important though: good legislation can help the situation, bad legislation can make it worse. Here comes the newest Housing (Scotland) Bill, which seeks to change the lot of those who rent the home where they live and ameliorate matters for those who do not have a secure place to live. This blog post gives an overview of the Bill, whilst offering some commentary on its key features for residential tenancies in Scotland.
The context and structure of the new Housing (Scotland) Bill
This an amending Bill, which means that it makes changes to existing legislation. As such the substance of it can sometimes be tricky to understand or indeed explain from a standing start. (At some point it might be useful for a future government to consider one or more consolidation statutes to bring relevant housing provisions together in a suitably accessible way. For better or worse, this Bill is not the place for that.) With that trickiness in mind, here is a quick primer about the existing rules (and where to find them).
Residential tenancies in Scotland are divided into two broad categories or “social” and “private”.
Social tenancies – where the landlord is either a local authority (often called a council) or a registered social landlord (often termed a housing association) – are largely governed by the Housing (Scotland) Act 2001.
Private lets – where the landlord is neither local authority nor RSL – are normally “private residential tenancies” (“PRTs”) in terms of the Private Housing (Tenancies) (Scotland) Act 2016, although some older statutes can govern tenancies entered into before December 2017.
Moving away from tenancies, homelessness law – whereby those lacking a place where they can legally stay (or those threatened with the prospect of that scenario in the near future) can present to a local authority so as to be afforded temporary and then permanent accommodation – is largely governed by the Housing (Scotland) Act 1987 (and also some regulations). A final category, that of owner-occupiers of homes, can also be observed, plus there are buildings which have been homes but are now empty or are now used for another purpose such as holiday letting: the new Bill is not focussed on such matters.
Returning to the Bill and the topics it does take in, its seven Parts cover “Rent”, “Dealing with evictions”, “Keeping pets and making changes to let property”, “Other matters relating to tenants”, “Homelessness prevention”, “Other housing matters” and “Final provisions”. The last of those Parts deals with technical stuff like regulation-making, interpretation, amendments, commencement and the statute’s short title – when it becomes an Act this will be the Housing (Scotland) Act 2025.
This blog post is focussed on the residential tenancy content that is found towards the beginning of the Bill. I won’t say too much about the (relatively self-explanatory) tenant personalisation provisions relating to pets and decorating purely to keep this blog post a manageable length. For completeness, I’ll offer a quick summary of the “Other matters…” and “Homelessness prevention” content at the end of this post. One other matter that I will flag now though is the possibility of converting an older type of private tenancy – known as an assured tenancy – to the more modern PRT; this will be relevant to the discussion around rent and eviction. Also relevant to the discussion around eviction is a feature of the “Homelessness prevention” content in the Bill, which actually relates to residential tenancies in the social sector. As detailed below, this will introduce new considerations for such tenants who are affected by domestic abuse, although I’ll begin with the Bill’s content in relation to renting in the private sector.
The new Housing (Scotland) Bill and private renting
Probably the most eye-catching provisions in the Housing (Scotland) Bill relate to rent control areas. Measures relating to private sector rents were expected, given the most recent Programme for Government and indeed prior soundings (including the Bute House Agreement) from the parties with the numbers to command the Scottish Parliament. Scotland has also had recent experience of temporary measures to curb in-tenancy rent increases since the implementation of the Cost of Living (Tenant Protection) (Scotland) Act 2022 (which were previously digested on the Strathclyde Law Blog). The last vestige of the 2022 Act’s rent regime – known as rent adjudication – will expire in March 2025 (I offered some commentary of that system – which caps annual in-tenancy rent increases at a maximum of 12% of the current rent – in a recent issue of the Scots Law Times (News)). The 2016 Act itself also contained a regime that could have mitigated rent increases in designated “rent pressure zones”, albeit no such zones were ever implemented. Rent pressure zones are now to be replaced by a framework for “rent control areas”.
How will rent control areas work?
The outgoing rent pressure zone framework placed local authorities in a central role, in terms of evidence gathering and making a case for their introduction to Scottish Ministers. The new Bill gives local authorities an even bigger role, as they are obliged to assess the state of private renting in their area and then report on that to Scottish Ministers. In addition to furnishing the Scottish Ministers with statistics, the report is to state (with reasons) whether the local authority recommends that they designate all or any part of the area of the local authority as a rent control area.
Such designation would be done by passing regulations, which are to last for five years (unless they are somehow revoked prior to their natural expiry) and “must provide that the rent payable under a private residential tenancy of a property in the area that is not an exempt property may not be increased by more than an amount specified in the regulations”. The restrictive amount that is to be specified in such regulations this “may include”:
- a specified percentage (which may be 0%) (i.e. no increase permitted at all);
- an amount falling within a specified range, or
- an amount calculated with reference to one or more specified factors, or other specified criteria (including a formula).
There are some important provisions about the properties that are exempt from restrictions or subject to modified restrictions. Differential application can be by reference to whatever Scottish Ministers consider appropriate, but with particular reference to: “(a) a description of the circumstances relating to the landlord of the property, (b) a description of the circumstances relating to the tenant of the property, [and] (c) a description of the property according to its type.” It is difficult to comment fully on these parameters until regulations are presented, but I have some concerns around the characteristics of the parties being deployed in a way that could skew availability in ways that could be difficult to predict or make categories of renters seem more preferable than others. Shaping controls based on let properties could be a bit less objectionable, with the example of exempting particularly young properties from rent control (or at least leaving the broad parameters of such properties to the planning process rather than rent controls) perhaps staving off a possible critique of rent control relating to stifling development. These are difficult issues though.
Will rent control areas work?
As has just been adverted to, rent controls (and their effect) can be a proverbial bone of contention. What would the proposed rent control areas mean for Scotland’s landlords and renters, never mind the wider housing situation? At this point, I will offer a suitable disclaimer that this blog post is not the place, and perhaps this blogger is not the person, to comment on the workability, desirability and possible effects of the scheme. I will nevertheless flag a recent publication that I co-authored with Peter Robson for the Juridical Review (the law journal of the Scottish universities) that reflects on how Scotland has dabbled with rent regulation and deregulation since 1915.
To the extent I can do justice to the issue here, it is trite to say that rent controls often trigger strong reactions. Those struggling to find or remain in an affordable home will understandably argue in favour of effective rent regulation. There are possible byproducts though, including in relation to landlord behaviour (in terms of leaving the market) and landlord profile (that is to say, by losing “mom and pop” landlords who are then replaced by landlords with bigger portfolios), not to mention what rent regulation might mean for the price, dispersal and quality of the rental stock that remains available for those who wish or indeed need to rent privately.
Private renting still represents an important part of the housing mix in many parts of Scotland, so this really needs to be considered carefully. These issues can of course be driven by things other than rent control, but rent control undeniably plays a part and/or is a lightning rod for commentary. Added to the current Scottish debate are the recent experiences of the temporary “rent freeze” then “rent cap”, which respectively allowed in-tenancy rent increases of up to 3% and 6% per annum.
Notwithstanding those controls which operated between September 2022 and March 2024, the price of private rentals in Scotland has markedly increased (owing to the ability of landlords to set a brand-new price at the commencement of a new tenancy, an option that has apparently been seized upon whenever it presented itself); this has even led to the average price of rented accommodation aggregated across the whole of Scotland rising faster than rents in both England and Wales, neither of which have rent controls (albeit these data are largely based on advertised new lets rather than existing lets). In fairness to the new Housing Bill, a solution to this particular issue has been presented by linking any new rent figure to any preceding rent for the same property, which offers something of a neat solution. Another Scottish factor is the devolved settlement in which our laws are made, which means that the new Scottish regime cannot affect (for example) the tax treatment of private landlords, or the increased mortgage interest payments many of them will be paying. Once again though, these are matters that are beyond the scope of this blog post.
What about older private lets?
One final comment about rent controls in the private sector relates to the fact that these new rent control areas currently only relate to PRTs – the most common private letting vehicle that can still be encountered in Scottish housing law. The oldest private sector tenancies that still exist in Scotland – being those that were entered prior to 1989 and governed by the Rent (Scotland) Act 1984 – have their own fair rent regime and do not need to be brought into this new reform. The second oldest category of private rentals – assured tenancies entered into between 1989 and 2017 governed by the Housing (Scotland) Act 1988 – do not have a fair rental scheme, and also will not be brought under new rent control areas. This is not necessarily an oversight, as the new Bill envisages all such assured tenancies will be converted to PRTs at a future date. As will be explained below, there is a potential issue with this in the context of eviction, and as such (notwithstanding that it could be a big drafting project for the Bill team) there is at least an argument that rent control areas should also be applied to assured tenancies.
The new Housing (Scotland) Bill and eviction
Sections 24 to 27 of the new Bill will introduce a duty for sheriffs or tribunal members to consider whether it would be reasonable to somehow delay the effect of any order that would bring a tenancy to an end. There are also some other provisions found elsewhere in the Bill that could affect the procedure a landlord must follow for a legal eviction. Section 28 reforms the existing law around unlawful eviction (that is, ousting a lawful occupier without a legal basis to do so). I’ll explain the changes to such irregular evictions below, after explaining the changes to “regular” evictions.
Eviction by legal process: the duty to consider delay
Looking first at the duty to consider delay, the First-tier Tribunal (Housing and Property Chamber) (as the forum for eviction proceedings concerning private lets) and the sheriff court (the forum for social lets) already have much to consider when deciding whether an eviction is to be ordered. In addition to establishing whether an eviction ground has been sufficiently evidenced (on the balance of probabilities), they may also need to establish whether pre-action requirements have been met (if rent arrears are the reason for the eviction) and in many cases they will need to weigh up the circumstances of the landlord and the tenant to determine whether it is reasonable to grant the order.
The new provision introduces another step for the majority of evictions. Where applicable, the tribunal or sheriff will have to consider whether it would be reasonable to select a date that postpones a landlord’s recovery of the let property given the circumstances. This new duty will only apply in relation to eviction grounds where a tenant might be deemed worthy of protection; for example, there would be no delay where a tenant has gone AWOL, or when the tenant has engaged in particular criminal or antisocial conduct.
Whenever this exercise is to be undertaken, the tribunal/court must consider whether a non-delayed order for possession would cause the tenant or a member of the tenant’s household to experience: financial hardship; some kind of detrimental health effect; or another detrimental effect due to the affected person having a disability (in terms of the Equality Act 2010). For private lets, this is to be counterbalanced with a consideration of similar factors from the other perspective, namely whether a delay would cause the landlord to experience: financial hardship; a detrimental health effect; or have another detrimental effect due to the landlord having a disability. There is then a new consideration of whether a “seasonal factor” would contribute to any financial hardship or detrimental effect on the tenant and, if relevant, a member of the tenant’s household or the landlord. “Seasonal factor” is not defined, but this would relate to, for example, casting someone to the winds during the winter. A fixed date range in relation to seasonal factors (as can be seen with the trêve hivernale that operates in France) could have brought some (blunt) clarity; conversely, not having a date range allows for some flexibility.
As to whether these provisions are desirable is largely a policy call, albeit one that is informed by the practical reality of any interaction of those who are evicted with the homelessness regime. Leaving that interaction with homelessness law and services to one side, and turning now to the most common private letting vehicle of the PRT, it should be acknowledged that this reform follows on from the removal of the “no fault” eviction ground (as compared to the short assured tenancies that dominated the private rented sector before 2017) and the introduction of a “reasonableness” assessment for all evictions in the aftermath of the Covid-19 pandemic. How this all plays out in terms of landlord behaviour (and particularly the potential for existing landlords to leave the market) and the housing stock that might be released in consequence is yet another matter that is beyond the scope of this blog post.
Moving to the social sector, section 16 of the Housing (Scotland) Act 2001 sets out what a sheriff can do in possession proceedings. It allows the court to adjourn proceedings relating to the tenant’s behaviour. The sheriff also has the power to impose conditions as to the payment of rent or otherwise when making such an adjournment. Guidance was issued by the Sheriffs Principal in 2022 to the effect that this power is normally limited to one adjournment, for a maximum 12 weeks. The interaction with any new delay and this existing adjournment power (and any new guidance) will accordingly be something to look out for.
Eviction by legal process: considerations for social tenancies and assured tenancies
Two further points can be made about “regular” eviction and the new Bill, neither of which relate to the core reforms found in Part 3.
First, the domestic abuse reforms that aim to prevent homelessness will actually affect the legal process for eviction in the social sector. This is because of new pre-action requirements for rent arrears, which will apply when the landlord considers that the tenant has experienced or is experiencing domestic abuse and that abuse explains or partly explains why rent has not been paid. This change to the eviction process accompanies other domestic abuse reforms that will affect social landlords, in relation to allocation of social housing and also a new requirement for social landlords to have a policy that considers the needs of tenants that are believed to have experienced or are experiencing domestic abuse (or are at risk of that). These reforms – and existing good practices in this area – were considered in a recent Scottish Housing News feature and podcast.
The second point around eviction relates to the already mentioned conversion of all assured tenancies to PRTs. Whilst it is accepted that this will simplify matters in the sector, plus it will allow those with tenancies governed by the Housing (Scotland) Act 1988 to access the new features of the Bill such around rent and tenant personalisation of the let property, care will need to be taken here to ensure existing tenants are not prejudiced. The most important feature of an assured tenancy in this context is it does not afford an eviction ground related to the landlord wishing to sell with vacant possession, whereas a PRT does. As such, I remain to be convinced blanket conversion is appropriate. In an ideal world, my own preference would be to allow the new rent and personalisation provisions of the Bill to apply to assured tenancies as well as PRTs, and then delay the conversion day until the remaining numbers of assured tenants are truly trivial. A secondary option might be to change the proposed scheme to allow assured tenancy tenants to opt out of automatic conversion, should they wish to (for example) preserve their eviction grounds as they are.
Eviction without legal process
The one other thing to mention about the eviction content in Part 2 of the Bill is the reform that is headed “Unlawful eviction: notification and damages”. For followers of Scottish housing law, its provisions around illegal eviction may look familiar. This is because similar provisions were shoehorned into the emergency Cost of Living (Tenant Protection) (Scotland) Act 2022. That aspect of that statute expired on 31 March 2024, at which point the measure of damages that could be awarded against anyone recovering possession of a property by irregular means reverted to the original scheme in the Housing (Scotland) Act 1988 (a scheme based on the difference between the value of the property with and without vacant possession). The related notification provisions – ordaining that any court or tribunal making an order awarding damages must notify the Scottish Housing Regulator, Police Scotland and/or the relevant local authority (depending on the nature of the occupation that was brought to an end) – also fell away.
These changes to the law were brought about by amending sections 36 and 37 of the Housing (Scotland) Act 1988, but those temporary changes were not particularly linked to the cost-of-living emergency. They found a home in the Cost of Living (Tenant Protection) (Scotland) Act 2022 for the simple reason that it was an available legislative vehicle for a fairly sensible reform. It is accordingly no surprise that the next available legislative vehicle, namely this new Bill, contains an almost identical regime on an open-ended basis.
The penalty calculation reform is indeed identical – damages are now (once again) to be based on a multiplier of the outgoing occupier’s monthly rent, ranging from 3 to 36 depending on what the court or tribunal thinks appropriate (i.e. up to a maximum of three times the previous annual rent). The only slight change in the Bill’s as compared to the Cost of Living (Tenant Protection) (Scotland) Act 2022 is a tweak to the definition of “rent” in order to reflect the fact that damages can be payable to any residential occupier under the 1988 Act (including those without a formal tenancy), whereas the 2022 Act was (on reflection incorrectly) drafted so as to refer specifically to tenants.
The rest of the new Housing (Scotland) Bill
As noted above, the Bill also contains Parts headed “Other matters relating to tenants”, “Homelessness prevention” and “Other housing matters”. The “Other matters…” Parts deal with a mishmash of regulation of mobile homes, fuel poverty, and (in relation to tenants) the otherwise unrelated topics of: what to do with deposit money that has not been claimed back by a tenant after the lease has ended; registration of letting agents; tenant termination of a joint private residential tenancy; modernisation of the rules for notice/document service or delivery in the social sector (moving away from a strict deployment of the term “recorded delivery letter” in one context); and the aforementioned conversion of older private sector tenancies. The reform around house-sharing private renters is perhaps worthy of a particular mention, given it should end a quirk that can see one or more co-tenants locked into a protracted situation with other (possibly problematic) co-tenants.
The “Homelessness prevention” Part makes some important changes that are indeed geared towards preventing homelessness. If enacted, they won’t directly change the core duty on local authorities to provide for those who present to them as homeless or threatened with homelessness (save to extend the time period in which persons can be regarded as threatened with homelessness, which will be based on a likelihood of losing any current accommodation within six months rather than the current two months). The main change for homelessness will be the introduction of duties that make prevention of homelessness a responsibility of various public sector actors. This is an evolution from a model that only intervenes when someone makes their predicament known to a local authority. The Bill does this by obliging appropriate bodies in the public sector or exercising a social function (such as health boards, Police Scotland, and registered social landlords) to inquire after the people they interact with as to their housing situation at opportune moments and then take action to prevent homelessness should that need arise.
Conclusion
The consultation period for the first parliamentary phase of the new Housing Bill closed on 24 May 2024. We now await the rest of its progress at Holyrood.
Will the new Bill solve the housing emergency? It certainly won’t do that on its own. Various other factors around housebuilding and the regulation of existing supply will play important roles too (such as fiscal tools targeting empty and second homes, or the licensing of short-term lets, or rural housing burdens designed to keep homes in fragile areas for the use of those who live locally). The Bill will nevertheless have an important part to play in the rental sector, and one cannot help but wonder what observers south of the Anglo-Scottish border are making of all of this.
The fact that the Housing (Scotland) Bill is before a devolved legislature allows for it to continue to progress notwithstanding the UK General Election. As such, it will not go the way of the Renters Reform Bill, which fell when Westminster was prorogued. This lack of English legislative progress is despite the fact that the Conservative Government had made a commitment in its manifesto to abolish the “no fault” eviction ground found in the Housing Act 1988 – the Scottish equivalent was abolished for new tenancies in 2017, and any older tenancies where this was previously a possibility have been subjected to an additional test of whether recovery of possession is reasonable in the circumstance since 2020. Scotland may indeed have a housing emergency, but its private renters are at least insulated from this precarity. When that core feature is coupled with the planned reforms in the new Bill, one can only imagine the envious glances that will be cast north by those campaigning for stronger renters’ rights in England. Conversely, English observers who are against rent controls will be poised to highlight anything that complicates or somehow diminishes the rental market in Scotland.
All that notwithstanding, it is for the Scottish Parliament to do what it thinks is best for Scotland. Now we hand the Bill over to our MSPs and hope they do a good job of it.