The Scottish Parliament is asking for the public's views on new legislation that proposes to cap rent increases for private residential tenancies – and give tenants more power to challenge rent levels.
The Fair Rents (Scotland) Bill was introduced on 1 June 2020. After initially being dropped due to concerns over lack of time for scrutiny, it is back on the Scottish Parliament agenda following judicial review proceedings from the Bill's backers. The Local Government and Communities Committee has now issued a call for views.
The Bill's principal proposal is the introduction of a cap on rent increases for all existing and new private residential tenancies (PRTs). Other tenancy types are not affected by the proposals.
In addition, tenants of PRTs would be able to seek an external determination of what is a fair open market rent for their rented property, and landlords would be obliged to record the rent charged for properties (whether let on PRTs or other tenancy type) as part of the landlord registration process.
The potential for rent control for PRTs already exists. Local authorities can apply to Scottish Ministers to designate areas within their control as a Rent Pressure Zone (RPZ). However, to designate an RPZ, the local authority must provide evidence that rents in the area are rising too much, rises are causing undue hardship for tenants and the authority is coming under pressure to provide, or subsidise the cost of, housing.
No RPZ has yet been designated, and the Bill's supporters believe this demonstrates that the existing provisions are not fit for purpose. A particular difficulty is said to be the lack of documentation of in-tenancy rent levels, to which local authorities could refer.
The rent cap proposed is, initially, Consumer Price Index (CPI) +1% on rent increases for all existing and new PRTs. The Scottish Government will be able to amend the cap, including by varying the percentage increase figure or providing that a percentage be subtracted from CPI. There are also wide powers to 'modify' application of the provision or make alternative provision for 'different circumstances'. Any amendment of the provisions would require the Scottish Parliament's approval.
The provisions in the Bill are drafted so as to sit alongside the RPZ provisions but in practice it is difficult to see what more the RPZ will bring to the table if all rent increases are limited anyway.
Determination of fair open market rent
The Bill's provisions are not as far reaching as the rent control regime for protected or regulated tenancies (i.e. the main lease types prior to the assured tenancy, granted before 2 January 1989, some of which still exist), in which rents are fixed for three-year periods and scarcity of supply is ignored. A tenant of a PRT will be able, at any time during the tenancy but not more than once in any twelve-month period, to apply to the rent officer for determination of the fair open market rent for the property.
This would allow existing PRT tenants to challenge the rents they are paying; and appears to be in addition to a tenant's right to appeal against a rent increase notice served by their landlord. At present, there is no ability for a tenant to challenge a starting rent in a PRT unless and until the landlord seeks to increase it further. At that point, a tenant can challenge the rent increase and seek a determination of the open market rent by the rent officer.
The new provisions would allow referral to the rent officer to determine a fair open market rent. In addition to the factors considered at an open market determination, the rent officer is specifically directed to reduce the rent if it is reasonable to do so if certain factors apply, including the property being in generally poor condition, having poor energy efficiency or the décor and furniture being of inadequate standard.
The Bill does not include specific provision limiting rent increases between one tenancy and the next. However, it is not certain whether an order fixing a rent under one tenancy – which is stated to last 12 months – might apply to restrict the rent under a new tenancy in that period.
The Bill will require details of monthly rents payable to be included in an application for landlord registration with the local authority.
By virtue of other provisions of the landlord registration legislation, the landlord will be obliged to notify the local authority when the rent for any property changes so that this information is kept up to date.
Landlord registration details can currently be checked online and it might be anticipated that the rent data will become part of that publicly available information.
Call for views
All of the proposals are still in draft and being consulted on. As well as accepting general comments on the Bill, specific questions posed in the call for views include whether respondents agree with the stated policy aim of the bill – to make private rents fairer for tenants and to create a better balance of power between private landlords and tenants – and whether they think the Bill will achieve that outcome; and what respondents consider the financial impact may be – on tenants, landlords, local authorities or others.
While the Bill is back on the agenda, it is not certain whether there will in fact be time for it to be made law before Parliament dissolves ahead of the May 2021 elections.
Interested parties should submit their views by 7 December.