Rented sector reform: Housing (Scotland) Bill: business and regulatory impact assessment

Evictions: Damages for unlawful eviction

Background, Objective and Rationale

In Scotland, tenants can only be legally evicted from their homes by order of the Sheriff Court or the Tribunal. Evicting someone without obtaining such an order is a criminal offence. An unlawful eviction also leaves the landlord liable to pay civil damages to the former occupier of the property under section 36 of the 1988 Act.

Currently, section 37 of the 1988 Act sets out the mechanism for the valuation of damages where an unlawful eviction has occurred. This calculation requires a professional surveyor valuation of the difference between the landlord’s interest in the property with and without a sitting tenant. This is not only an expensive process, which could cost in the region of £1,000,^[79] but feedback from stakeholders included an example where it led a nil valuation, and thus no damages were payable. A briefing paper on unlawful evictions^[80] and available information from the Tribunal^[81] indicate that only a small number of cases have ever been taken.

Having a strong enforcement regime is a key part of a successful regulatory framework. Not only does it ensure that tenants are protected, it also prevents landlords who wish to comply with legislation from being undercut by competitors who do not comply with their legal obligations. Strong enforcement therefore supports fair competition in the sector.

There is significant evidence in support of these contentions. As part of a survey of private landlord behaviour in the UK, landlords in Scotland were asked an open question about how the law should change in order to help improve standards in the PRS. The most popular response was around improving enforcement of regulations.^[82] In the most recent wave of data collection for the RentBetter project, interviews with landlords and letting agents in Scotland who were asked about proposed legislation (outlined in the New Deal for Tenants consultation) found that several respondents supported stronger enforcement as necessary to ensure ‘unscrupulous’ landlords comply with regulation, although they did not specify a mechanism for enforcement.^[83] Furthermore, a 2020 study looking at how to improve compliance with PRS legislation in the UK found that ‘[t]he regulatory efforts of local authorities in the PRS are seriously undermined by the low fines and other sentences’.^[84]

Sectors and Groups Affected

The main sectors and groups who could be directly affected by the various options considered include:

• Tenants in the private and social rented sectors
• Private and social sector landlords
• Scottish Courts and Tribunals Service
• Scottish Housing Regulator
• Surveyors
• Sheriff Officers

Option 1 – Do nothing (Business as usual)

In this option, current legislation would remain the same and tenants who have experienced unlawful eviction would continue to have to incur the costs of a professional survey valuation to determine the level of damages to be awarded, which could lead to a nil valuation on occasion.

This is not the preferred option as doing nothing would not address the concerns raised about the current process being a barrier to tenants seeking unlawful eviction damages. This means that tenants will not be appropriately compensated, and unscrupulous landlords will not be disincentivised from engaging in unlawful behaviour.

Option 2 – Non-regulatory measures

This option would see the current legislative process for awarding civil damages for an unlawful eviction remaining the same. Instead, action could be taken to raise awareness of illegal eviction and work with key stakeholders to support the enforcement of existing legislation.

This is not the preferred option as it would not remove the requirement for a costly professional valuation, which is considered a barrier to many tenants exercising their existing rights, as well as the possibility of a nil or low valuation meaning that tenants are not appropriately compensated for the costs of a unlawful eviction. This option would therefore have limited impact on helping to enforce existing legislation.

Benefits

Private tenants and landlords

Awareness of tenants’ rights and being empowered to exercise them is an essential aspect of a well-functioning regulatory system, which would benefit both tenants and responsible landlords. Further awareness-raising activity could mean that more tenants become aware of their rights, in particular what constitutes an unlawful eviction and the options for redress. However, given there have been previous awareness-raising exercises, the number of additional tenants who will choose to enforce their rights might be small, especially as the barriers to successful enforcement set out above (the cost of a surveyor’s report and the valuation basis) will remain.

Costs

Cost for this non-regulatory action would be for the Scottish Government and depend on the type and extent of awareness-raising activity undertaken. Recent national marketing campaigns raising awareness of private tenants’ rights more generally, including on unlawful eviction, cost £165,000 in 2021-22, and £80,000 in 2023-24 by reusing previous creatives.

Option 3 – Legislate (Preferred option)

This option would see a permanent change to the basis of the calculation for unlawful eviction damages, from damages based on the difference between the valuation of the property with and without tenants to a multiple of monthly rent (between three and 36 times the monthly rent). In addition, where an unlawful eviction was found to have occurred, the Tribunal or Court would be required to inform Police Scotland, the relevant local authority where the private landlord should be registered or, in the case of a social landlord, the Scottish Housing Regulator.

Drawing on existing evidence, as well as data collected with UK private landlords, a recent study^[85] emphasises that a range of measures to improve compliance are required to support good practice, as landlord behaviours are influenced by a number of factors, including traditional enforcement measures as well as other social and economic factors. Increasing the risk that landlords would have to pay damages following an eviction has the potential to play into the economic factors that influence compliance.

These changes aim to make it easier and more meaningful for tenants to challenge an unlawful eviction and receive appropriate damages where an unlawful eviction is found to have occurred. This is our preferred option as it would remove barriers within the current system to tenants seeking and being awarded unlawful eviction damages and may act as a deterrent to landlords in circumventing the legal processes required to end a tenancy.

Benefits

Private and Social Tenants

Under this option, tenants would benefit as it would be easier for them to challenge and seek appropriate compensation where an unlawful eviction occurs. In particular, they will not have to incur the cost of a professional valuation, which could cost in the region of £1,000. While this approach benefits all tenants who are unlawfully evicted, it will be particularly beneficial for lower-income tenants who can least afford the cost of a professional valuation, helping to improve their access to justice.

Tenants may also benefit from this measure if it reduces the number of unlawful evictions that take place in the first place, by making it more difficult, more expensive, and higher risk for a landlord to pursue an unlawful eviction rather than going through the lawful routes.

Evidence is presented above of the negative health and wellbeing impacts that private tenants face relating to insecurity of tenure and experience of evictions, particularly low-income tenants who may find it harder to secure another tenancy. This supports the importance of ensuring that there is appropriate deterrence of illegal evictions, and compensation when they take place.

Landlords and letting agents

Responsible landlords and letting agents would benefit from changes to the current system which mean unscrupulous behaviour is more easily challenged and regulations are better enforced. This would help to ensure a level playing field.

Evidence set out above highlights the priority that landlords place on effective enforcement, since it protects responsible landlords as well as tenants.

Costs

Private landlords

There are no anticipated additional operational costs to private landlords who comply with the law in relation to this measure. Where a landlord is found by the Tribunal to have carried out an unlawful eviction, the cost to the landlord will depend on the individual circumstances of the case and the level of monthly rent of the let property.

Under the measures, the Tribunal will be able to award damages of between three times and 36 times the monthly rent. The Tribunal can also award damages at a level lower than the minimum threshold where the circumstances of the case merit a lower award. Based on the average rent for a 2-bed private rented property (£841)^[86] in Scotland this could result in a landlord paying damages to the tenant of between £2,523 and £30,276.

Social rented sector landlords

There have been no known cases of unlawful eviction in the social housing sector to date. The social rented sector is heavily regulated and the position regarding applications for unlawful eviction damages is not expected to change with these new provisions. Therefore, there are no anticipated costs to social housing landlords in relation to this measure.

Surveyors

The measures will result in professional surveyor valuations no longer being required as part of an application for unlawful eviction damages. Based on the low level of unlawful eviction applications made (only four in 2021-22) to the Tribunal the financial impact on surveyors is considered minimal.