Following many hours of debate, consultations, discussions with stakeholders and lobbying from all sides in the real estate industry, the Housing (Scotland) Bill has finally been passed by the Scottish Parliament. Here we highlight some of the main changes to be introduced by the Bill.
Exemptions from rent controls – BTR and MMR
Before turning to the rent controls themselves, Scottish Government has confirmed that mid-market rental (MMR) properties and build to rent (BTR) properties will be exempted by way of regulations which should be finalised by the end of the year. The regulations will set out the details of what is meant by BTR and MMR for the purposes of the exemptions.
Rent controls for private residential tenancies
The Bill provides for rent controls on increases in rent under private residential tenancies (PRTs), the main type of residential tenancy for private rented property in Scotland.
Rent controls will not apply on a blanket basis; they will apply only in rent control areas (RCAs). Local authorities must assess and report on rent conditions and submit their proposals for the creation of an RCA within their jurisdiction for approval by the Scottish Ministers. An RCA could be the whole area under the jurisdiction of a local authority or only parts of areas.
Rent increases for new and existing PRTs in RCAs will be capped at CPI +1% (up to a maximum increase of 6% in fairly exceptional circumstances). Note this is a cap, not a guaranteed uplift. This cap will also apply to “in-between tenancies”.
When will rents be reviewed and controls applied?
Rent reviews can only take place once a year under a PRT. If the property in question is situated in an RCA rent controls will apply to those annual reviews during a PRT and will also apply “in-between tenancies”. The application of a rent cap “in-between tenancies" means that, in addition to only permitting rent reviews once a year, starting rents for new tenancies will also be restricted for those properties which have been subject to a tenancy agreement in the previous 12 months.
Regulations will set out how rent controls can be modified to allow a landlord in an RCA to increase the rent by more than the level of the rent cap in certain situations. So far it has been confirmed that these regulations will allow rent controls to be modified where a property located in an RCA has been let for a rent significantly below market rates and also where a landlord has made certain improvements to their property.
Where and when will rent controls not apply?
Rent controls will not apply where a property is not in an RCA.
Rent controls will also not apply where a property (which is situated in an RCA):
- has been unlet for at least 12 months immediately before a new tenancy begins; or
- has been acquired with vacant possession and is being leased for the first time; or
- is exempt (see below)
Rent controls will not apply to student accommodation provided by educational institutions and qualifying purpose-built student accommodation -i.e. developments with planning permission requiring the accommodation to be used predominantly for housing students and comprising at least 30 bedrooms. This is regardless of whether the student accommodation is located in an RCA or not.
Whilst student accommodation will not be subject to rent controls, the Housing Bill will introduce a right to allow students to end their student tenancies on 28 days’ notice on specified grounds likely to include, for example, family bereavement or leaving to study in a different city.
Enhanced protection for tenants against eviction and homelessness
The Bill is aiming to make the prevention of homelessness a shared responsibility across the public sector and will introduce an ‘ask and act’ duty on local authorities and other relevant public bodies. Social landlords will also be required to have a policy on how they will support tenants at risk of homelessness due to domestic abuse.
There will also be increased protection against eviction for tenants. The Sheriff Court and the First Tier Tribunal will have to take into account additional factors when dealing with an eviction case and consider whether it would be reasonable to delay eviction. The Court or Tribunal must balance the impact on the tenant and members of the household if eviction was not delayed, with the potential impacts to the landlord if the evictions is delayed.
Improved rights for tenants to keep pets and make changes
Tenants will be entitled to keep pets in their home, provided they have obtained consent their landlord and there will be an appeals process for a tenant if a landlord has refused consent. Tenants will also be permitted to make changes to their homes. There will be 2 categories of changes. Consent from a landlord will not be required for Category 1 changes. Consent will be required for Category 2 changes. What is covered by each category will be set out in regulations.
Implementation of Awaab’s Law
The Bill broadens the Scottish Ministers’ powers to implement ‘Awaab’s Law’, named after two-year old Awaab Ishak who died in 2020 following prolonged exposure to damp and mould in his home in 2020. The law seeks to hold landlords accountable for addressing damp and mould issues promptly and to safeguard tenants from the detrimental effects of substandard living conditions. The Bill allows Scottish Ministers to implement guidance to further specify the circumstances in which a house is to be considered to be substantially free from rising or penetrating damp.
What happens next?
The Bill will likely receive royal assent within the next six weeks. Different parts of the Bill will then come into force at different times.
Rent controls will not come into effect on the Bill coming into force. Local authorities must submit their assessments of rent conditions by the end of May 2027 which means that rent controls will not be effective in any part of Scotland until summer/autumn of 2027 at the earliest.
The Scottish Government will continue to work with stakeholders to assist them in framing the regulations which will be needed to introduce exemptions, the right to end student tenancies, the changes that tenants will be able to make to their homes and more.
The journey of the Housing Bill through the Scottish Parliament has had its twists and turns but ultimately, the Scottish Government has navigated a path seeking to balance the concerns of tenants and landlords.
Contributors
Legal Director
Director of Knowledge (Real Estate)
