Scotland's rental reforms: what can other nations learn?

In December 2017, Scotland introduced the open-ended Private Residential Tenancy (PRT) and powers for councils to introduce Rent Pressure Zones (RPZs) to protect tenants from rising rents.

As we await the Westminster government’s announcement on security of tenure for private renters in England, this is a good moment to look back at the Scottish tenancy reforms and consider what’s worked well, what’s not so good, and where next for the Scottish private renter movement.

New open-ended tenancy 

Private tenants in Scotland who signed new tenancies from 1st December 2017 were no longer on insecure Short Assured Tenancies but a Private Residential Tenancy. The PRT does away with fixed terms and is an open-ended contract, which the tenant can leave with 28 days’ notice. The landlord can only raise the rent once every 12 months and must provide three months’ notice of this to the tenant, who can challenge the increase by referring it to the local rent officer.

The PRT gives increased security of tenure to Scotland’s private renters. Landlords always have to provide a legitimate ground if they want to kick tenants out, and the notice period is on a sliding scale depending on the ground and how long you’ve lived in the property. A tenant can challenge an eviction at the new First-tier tribunal.

All great stuff so far – open-ended tenancies with flexibility for the tenant to leave when they wish, no eviction without grounds, and limits on the frequency of rent rises with the tenant able to challenge the increase.

But Scotland’s model is far from perfect. There are still 18 grounds for possession that a landlord can use to get an eviction order. Eight grounds are mandatory, which means the tribunal cannot refuse an eviction if grounds are proven. Eight grounds are discretionary, with the tribunal deciding whether an eviction is reasonable. And two grounds straddle the two types – e.g. whether rent arrears is a mandatory ground depends on how many months’ rent the tenant owes (the other relates to those rare cases where your landlord is your former employer).

Tenants who are evicted through no fault of their own, e.g. because their landlord wants to sell or move back in, receive no compensation for losing their home, to cover unexpected moving costs. Tenants moving into a property also have no minimum time period where the landlord cannot use the selling up ground to repossess the property – unlike on an SAT where there is an initial period of at least six months where the landlord cannot use Section 33 to evict without grounds (the English equivalent is Section 21). Madeleine Cross explores this in more detail here.

So the PRT really doesn’t do much to improve the situation for tenants evicted without being at fault. This is a real weakness, particularly given how many evictions happen because the landlords is selling or moving back in (in England the figure is 63%).  Granted, tenants who have been in their home for longer periods of time will have longer notice periods if their landlord is evicting them to sell, but this still not enough. MSP Andy Wightman explains more here.

Landlords who evict to sell only to relet the property can be penalised and forced to compensate their former tenants, but it is up to the evicted tenant to check. To verify that an eviction has been done by the book will be of scant comfort to a tenant who has already lost their home.

Potential for rent caps

The other way you can be forced to move is if your landlord raises rent to an unaffordable level. Landlords with a motive for removing you (e.g. you’ve asked for repairs that they don’t want to do) but without legitimate grounds for eviction could attempt this instead. Another apparent shortcoming of the new model is that landlords aren't prevented from raising the rent within months of you moving in, as long as they give 3 months' notice.

Under the PRT, tenants can appeal against a proposed rent rise, with Rent Service Scotland adjudicating. But this could still see the rent increase, particularly if there is a shortage in the wider market. That’s where RPZs (theoretically) come in.

Councils can apply to the Scottish Government to set up an RPZ if they can demonstrate that rents have been rising locally at an unaffordable rate. But there are three problems with this system. First, data on rent levels are very poor and may not be sufficient to support an application. Second, the process of gathering data, applying for an RPZ, then implementing it, takes time (up to five years, reckons Edinburgh Council) so could see protection come in only after temporary surges in demand have taken place, shutting the stable door after the horse has bolted. Third, even under an RPZ, rent rises will only ever be limited to inflation plus 1% at least – and only within tenancies. The Scottish Government couldn’t have designed a weaker system of rent regulation.

Generation Rent is calling for tenants evicted on no fault grounds to receive compensation, paid by the landlord to the tenant. This would mitigate the financial hardship to the tenants, reduce the risk of them becoming homeless, and incentivise landlords considering using such grounds to explore other options, such as selling with sitting tenants or finding somewhere else to live. It would also disincentivise misuse of possession grounds. Rent regulation should at the very least limit rent increases to wage inflation to prevent further erosion of affordability and stop retaliatory rent hikes.

Living Rent Scotland has recently published, with Common Weal, a critique of RPZs with a proposal for a more ambitious system of rent control.

What about existing tenancies?

Finally, existing fixed-term contracts can be rolled over into statutory periodic tenancies, with no security, no limits on rent rises, and an often inadequate two-month notice period. Existing statutory periodic tenancies can also continue to roll on indefinitely. Tenants in these positions may not know about the new PRT and might wish to move onto such a tenancy, with the increased rights it gives them. Even if they did ask for a PRT, the landlord could still refuse.

Just over a year after open-ended tenancies were introduced, it’s still too early to have any solid data back on the impact of the reforms on the private rental market in Scotland, and the difference this has made to Scottish renters.

But we do know that tenants across the UK have been calling for increased security of tenure for a long time and Scotland has led the way with the PRT. Scotland’s track record also includes a ban on letting agent fees (clarified in 2012) and, since 2006, a mandatory national landlord register. The other UK nations have been slowly catching up. Last month the Westminster government (acting for England) enacted a letting fees ban, and unveiled plans for landlords to join a redress scheme. English letting agents have had to be part of a redress scheme since 2015, and, while Scotland only caught up on that in 2018, they have gone one better with a statutory code of conduct.

Wales brought in landlord registration in 2016 and is working on its own fees ban. Northern Ireland has had landlord registration since 2014 and in 2018 a court ruled that some fees in Northern Ireland are illegal. Read more about the legality of letting fees around the UK.

 

Thanks to Jen Parker for her advice.

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