Rented Sector Reform: Island Communities Impact Screening Assessment

Objectives

In March 2021, the Scottish Government published Housing to 2040^[1], the first national long-term strategy and route map, that set out the Scottish Government’s vision for housing to 2040. It included the ambition that everyone has a safe, good quality and affordable home that meets their needs in the place they want to be. This ambition can only be achieved with further improvements to the way the rented sector operates.

The overall policy objective of the rented sector reform measures in the Bill (covering Parts 1 to 4 – except Registration of letting agents - and some of Part 5) is to take forward legislative changes that will contribute to achieving our vision for housing and deliver some of the reforms outlined in Housing to 2040 and our “New Deal for Tenants: Draft Strategy Consultation”^[2] with a view to:

• improve affordability by introducing an effective national system of rent controls in the private rented sector (“PRS”), with an appropriate mechanism to allow local authorities to introduce local measures;
• improve the renting experience through the creation of new rights for tenants to request and not be unreasonably refused consent to make changes to personalise their home and to keep pets; and
• enhance and strengthen certain aspects of the current regulatory framework ensuring it works for both tenants and landlords and balances their respective rights.

There are twelve areas where rental reform is being proposed to be delivered though the Bill:

1. Introduction of a framework that allows for the implementation of a national system of rent control;

2. Build on existing tenant protections to prevent rent increases in the first 12 months of a new tenancy;

3. Enhancing the process by which a private tenant can seek a rent adjudication from Rent Service Scotland or via the First-tier Tribunal for Scotland (Housing and Property Chamber) (“the Tribunal”) by removing the risk that the rent can be set above that requested by the landlord;

4. Increased protections for private and social tenants during the eviction process;

5. Strengthening the process by which private and social tenants can seek damages where they have been unlawfully evicted;

6. Additional rights for private and social tenants to request to keep a pet;

7. Additional rights for private tenants to make changes to their rented home;

8. Changes to enable unclaimed tenancy deposit money to be put to good use for the benefit of PRS tenants;

9. Reforming the process by which a joint private tenancy can be ended where there is no mutual agreement to prevent tenants being held in a tenancy against their will;

10. Changes to the method of service of social sector rent increase notices;

11. A regulation-making power allowing for conversion of tenancies issued under older legislation types to be converted to Private Residential Tenancies; and

12. Changes to social housing pre-action requirements to reflect the potential impact of domestic abuse financial control.

New housing legislation is required to deliver these changes. Good quality, affordable and well-regulated rented housing will generate benefits that can help tackle poverty, promote equality, support wellbeing, tackle homelessness and support sustainable communities where people can prosper. This will contribute to the National Outcomes for Children and Young People, Communities, Poverty and Human Rights. The key areas of the Bill are detailed below.

Part 1 (Chapters 1 & 2), Powers for Scottish Ministers to introduce rent control areas.

This part of the Bill introduces a legislative framework to support the implementation of an effective national system of private sector rent controls that takes account of local circumstances in relation to rent levels. The intention is that where a rent control area is introduced, there will be a limit on the amount by which private rents can be increased within that area. This will provide tenants with stability in terms of rent levels, helping to support efforts to reduce poverty and improve outcomes for low income tenants and their families

Part 1 (Chapter 3), Frequency of rent increase.

These provisions modify current requirements to ensure that the rent payable under a private residential tenancy may not be increased during the first 12 months of the tenancy, in areas not subject to rent control. These measures are intended to provide tenants with the security of knowing that the rent they have agreed to at the start of the tenancy will not increase during the first 12 months.

Part 1 (Chapter 3), Capping of rent increases on referral or appeal.

This measure introduces changes to the current rent adjudication procedures for those with a Private Residential Tenancy under the Private Housing (Tenancies) (Scotland) Act 2016 (“2016 Act”) and for Assured Tenancies under the Housing (Scotland) Act 1988 (“1988 Act”), to remove the ability of the Rent Officer or the Tribunal to determine a higher rent above that requested by the landlord.

Part 2, Evictions: duties to consider delay.

This introduces a specific requirement on both the Tribunal and the Scottish Courts that where an eviction order/decree is granted, to consider whether there should be a delay to the enforcement of that eviction order/decree. Under the changes, the Tribunal/Court would be required to always consider whether a delay to enforcement should take place based on the circumstances of the case, except in limited circumstances. For example, to take account of the personal circumstances of the tenant or where wider seasonal pressures (periods of religious significance, exam periods for families with school age children or where more time is required to access suitable alternative accommodation) which make immediate eviction unreasonable, balancing the rights of tenants to be protected during eviction and the rights of landlords to recover their property.

Part 2, Evictions: damages for unlawful eviction.

These measures make permanent the temporary reforms introduced under the temporary Cost of Living (Tenant Protection) (Scotland) Act 2022 to change how unlawful eviction damages can be awarded. This would remove the requirement for a professional valuation report for determining the level of damages and replace it with a calculation based on the multiplication of monthly rent between 3 and 36 months.

Part 3, Private residential tenancy and Scottish Secure Tenancies: Keeping pets.

These changes would amend the existing tenancy frameworks under the 2016 Act and the Housing (Scotland) Act 2001 (“2001 Act”) so that private and social tenants would have the right to request, and not unreasonably be refused, consent to keep a pet. This would no longer allow landlords to issue a blanket ban on pets.

Part 3, Private residential tenancy: Making changes to let property.

These changes would amend the existing tenancy framework under the 2016 Act so that tenants with a Private Residential Tenancy (“PRT”) would be able to make certain minor modifications without consent, to be defined by regulations (e.g. putting up pictures and posters), and have the right to request certain other modifications, to be defined by regulations (e.g. painting walls, putting up shelves) that could not unreasonably be refused.

Part 4, Unclaimed tenancy deposits etc.

This introduces changes to how the private sector Tenancy Deposit Schemes operate by amending the Housing (Scotland) Act 2006 (“2006 Act”) to enable unclaimed tenancy deposit funds to be put to good use to the benefit of tenants living in the PRS.

Part 4, Ending Joint tenancies.

This introduces a change to the process by which a joint tenancy can be ended under the PRT. The proposed change would mean that where there was no mutual agreement between joint tenants to end the tenancy, one joint tenant could end the tenancy for all but only after providing other joint tenants with two months’ notice before they could issue the standard 28 day notice to end the tenancy.

Part 4, Social landlords: delivery of notices etc.

This introduces a minor technical amendment to add two new and additional options for giving notice of a rent increase, namely by a tracked postal service and by being sent to the person using electronic communications (i.e. email or a secure tenant management platform).

Part 4, Converting older tenancies.

This creates a regulation-making power which would enable a date to be set on which tenancies under the 1988 Act would convert to PRT under the 2016 Act. Exercise of this power would be subject to consultation. If used, this would enable tenants with tenancies under the 1988 Act to benefit from the protections under the 2016 Act, along with the proposed protections in the Bill, and reduce complexity and confusion in the sector.

Part 5, Social landlords pre-action requirement where domestic abuse a factor.

This introduces changes to the social housing pre-action requirements to require social housing landlords to specifically consider the effect of domestic abuse in the accrual of rent arrears. Where domestic abuse financial control has had an impact on the arrears, landlords will be required to fully consider further actions that could assist the victim-survivor before eviction action for rent arrears can be taken in court.

Intended impacts, outcomes and potential differences across the islands

The over-arching intended impact of these measures is to improve outcomes for people in Scotland who live in rented accommodation, whilst safeguarding the proportionate use of a landlord’s property for rental purposes – seeking to deliver a fair balance between protection for tenants and the rights of landlords.

We are aware that rented properties are important in island communities, for example, allowing people to move into the area to take up jobs or to support seasonal working in particular localities. In general, levels of private and social housing provision and need may differ between different local island communities and the effects of any changes in the sector may therefore be felt differently in each community. However, as the measures proposed in the Bill seek to make rents more affordable and ensure people are less likely to be ‘priced out’ of housing due to rent increases, whilst also seeking to improve the overall renting experience through strengthening of rights, the measures may be beneficial to island communities.

Further detail on the intended impacts and outcomes of the measures is set out below alongside how these potentially differ across the islands.

Part 1 (Chapters 1 & 2), Powers for Scottish Ministers to introduce rent control areas.

Rent control policies are aimed at making rents more affordable and ensuring tenants are less likely to be ‘priced out’ of housing due to rent increases. The introduction of a national system of rent controls in the private sector will contribute towards achieving our overarching objective of improved outcomes for tenants. Rent control is designed to help stabilise rents in areas where market rents have been increasing particularly steeply, whilst ensuring there can be a balanced approach that provides appropriate protection for the property rights of landlords.

The measures being introduced create the framework to deliver a nationally consistent approach to the consideration of the need for rent control, whilst maintaining the link to local circumstances. Local authorities will take the lead in carrying out mandatory assessments in their areas, ensuring that local circumstances are taken into account, to reflect the geographical variations that can exist in conditions relating to rents across Scotland. The assessments will be carried out on a cyclical basis, to ensure there is ongoing consideration of the need for rent control.

The outcome of these assessments will inform Scottish Ministers’ decisions on whether it is justified and proportionate to designate rent control areas for the purpose of protecting the social and economic interests of tenants in those areas. In any area designated for rent control, the restriction on the level of rent increases that are permitted will apply both within and between tenancies, to stabilise the level of rents within the area and avoid the potential for rents to continue to rise more steeply between tenancies.

We have not identified any differential impact from this measure on island communities. The measures in the Bill create the framework to deliver a nationally consistent approach to the consideration of the need for rent control, whilst maintaining the link to local circumstances. However, we know that affordable accommodation can be limited in Island Communities, therefore any rent control measures put in place will provide tenants with stability.

Part 1 (Chapter 3), Frequency of rent increase.

The measures in the Bill are intended to build on the existing requirements in the 2016 Act on the frequency at which rents can be increased, making clear that rent increases cannot take place during the first 12 months of a tenancy. This is aligned with the existing requirements in relation to rent increases – whereby rent can only be increased once in any 12 month period – and would provide clarity and certainty for both landlords and tenants on the rent that will apply for the first 12 months of any tenancy.

We have not identified any differential impact from this measure on island communities.

Part 1 (Chapter 3), Capping of rent increases on referral or appeal.

Measures in the Bill are designed to provide greater protections for PRS tenants against high rent increases by ensuring that where a tenant refers a proposed rent increase under a PRT or an Assured Tenancy for review, that the Rent Officer or Tribunal cannot set a rent higher than that proposed by the landlord.

This aims to remove the risk that the rent could be set higher than the rent increase proposed by the landlord, addressing concerns that the current process may act as a disincentive to tenants from making use of their right to refer a rent increase for independent adjudication.

We have not identified any differential impact from this measure on island communities.

Part 2, Evictions: duties to consider delay.

Measures in the Bill are designed to provide greater protection for all private and social rented sector tenants during the eviction process, except in limited circumstances, by introducing a specific requirement on both the Tribunal and the Scottish Courts, that where an eviction order/decree is granted, they should consider whether a delay to the enforcement of that eviction order/decree is reasonable. This is intended to:

• ensure that consideration is given to any seasonal pressures or individual circumstances where it would be reasonable to give those being evicted additional time before the eviction could be carried out to find alternative accommodation or access the necessary support;
• reduce, as far as possible, the negative impact of eviction at a time of greater stress resulting from additional pressures or individual circumstances; and
• ensure that all the circumstances of a case are considered and that the rights of tenants are appropriately balanced against the rights of landlords to recover the let property.

We have considered the wider impact of any delay to enforcement of an eviction on private rented tied accommodation. This measure could result in a further delay for an employer being able to house a new employee. This is an issue for all employers who provide accommodation but may be exacerbated by shortages in affordable alternative accommodation, for example in island and rural communities.

Current legal processes, and the measures outlined in the Bill, mean the impact on both the tenant and landlord of the timing of the enforcement of an eviction are taken into account. The Tribunal is the correct place to balance the rights of both tenants and landlords when deciding whether an eviction is reasonable or not; and whether or not a delay to the enforcement of that eviction should be ordered or not, based on all the circumstances of the case. The Tribunal must act compatibly with the European Convention on Human Rights. We do not, therefore, consider that island communities specifically would be disproportionately affected by these measures.

We have not identified any differential impact from these measures on social housing tenants in island communities.

Part 2, Evictions: damages for unlawful eviction.

Measures in the Bill aim to change the way that civil damages for an unlawful eviction are calculated, so they are based on a multiplication of monthly rent. This aims to simplify the process for applying for damages by removing the requirement to have a professional valuation making it easier for tenants to seek damages where an unlawful eviction occurs. The provision will help to ensure tenants are suitably compensated where an unlawful eviction occurs and is intended to help to deter landlords from carrying out an unlawful eviction as the risk of challenge and financial penalty will be higher.

We have not identified any differential impact from these measures on island communities. However, we know that alternative available affordable accommodation can be limited in island communities, which could exacerbate the negative impact of an unlawful eviction. Measures that deter landlords from carrying out an illegal eviction may therefore be particularly beneficial for tenants in island communities.

Part 3, Private residential tenancy and Scottish Secure Tenancies: Keeping pets.

Measures in the Bill are designed to give private and social housing tenants greater flexibility to have a pet by introducing a right to request to keep a pet, and for tenants’ requests not to be unreasonably refused.

For a PRT under the 2016 Act (those whose tenancy began on or after 1 December 2017); and for social rented sector (“SRS”) tenants with a Scottish Secure Tenancy or a Short Scottish Secure Tenancy under the 2001 Act, this will:

• improve the renting experience for private and social housing tenants by giving them more control over having a pet, supporting their mental health and wellbeing;
• more closely align the rights of private and social housing tenants creating greater equality of outcome between tenures; and
• appropriately balance the strengthened rights for tenants with sufficient protections for landlords.

We have not identified any differential impact from these measures on island communities. However, discussions with stakeholders have highlighted consideration of agricultural issues such as sheep worrying, especially at lambing season, and impact on low nesting birds.

The Bill includes powers to set out further details in secondary legislation on reasonable reasons for refusal and reasonable conditions for approval in relation to the PRS. The Bill also includes statutory consultation requirements with tenants and landlords in making use of those powers. This will provide an opportunity for further consideration of any particular issues, or alternative requirements for island communities.

Part 3, Private residential tenancy: Making changes to let property.

Measures in the Bill are designed to create a framework to enable tenants with a PRT greater rights to make certain prescribed changes (category 1) without the consent of their landlord, and the right to request certain other prescribed changes (category 2) to their rented home that cannot be unreasonably refused. Category 2 requests can only be made after a tenant has lived in the let property for more than 6 months; and landlords will be able to refuse where it is reasonable to do so, approve or set reasonable conditions for approval.

This is intended to:

• improve the renting experience for private tenants with a private residential tenancy by giving them more control over personalising their home, supporting better mental health and wellbeing;
• more closely align the rights of private tenants with other tenures while continuing to take account of the differing legal frameworks; and
• seek to appropriately balance the strengthened rights for tenants with sufficient protections for landlords.

We have not identified any differential impact from these measures on island communities. Measures in the Bill create a framework and require further consultation with tenants and landlords to determine the types of changes that fall under each category; and the reasonable reasons for refusal or conditions for approval that should be prescribed in regulations. This will provide an opportunity for further consideration of any particular issues, or alternative requirements for island communities.

Part 4, Unclaimed tenancy deposits etc.

Tenancy Deposit legislation under the 2006 Act currently requires that both unclaimed tenancy deposit funds and tenants’ details are held indefinitely by an approved tenancy deposit scheme until a deposit is repaid. Measures in the Bill are designed to introduce changes to the Tenancy Deposit Schemes requirements to enable the use of unclaimed tenancy deposit funds by reinvesting them to the benefit of tenants living in the PRS. Provisions in the Bill mean a deposit would be considered as unclaimed five years from the tenancy end date, allowing tenants to have clarity on when the five year timescale to reclaim commences. Provisions enable the schemes to release unclaimed funds to Scottish Ministers, or another designated third party and sets limitation on the use of these unclaimed funds to ensure they benefit PRS tenants including providing and securing the provision of:

• advice, information or assistance to private tenants in relation to their rights as tenants;
• other services or facilities that promote of support the interests of such tenants, and
• preventing private tenants from becoming homeless.

We have not identified any differential impact from these measures on island communities.

Part 4, Ending Joint tenancies.

Measures in the Bill are designed to reform how joint tenancies in the private sector are ended to enable one joint tenant to end the tenancy for all tenants where there is no mutual agreement between joint tenants to end the tenancy. This would be possible only after the tenant who is seeking to end the tenancy has provided the other joint tenants with appropriate notice. The Bill sets this pre-notice period as at least two months’ notice before a joint tenant could issue the standard 28 day notice to end the tenancy to the landlord. This is intended to:

• ensure no joint tenant can be indefinitely held to a rental contract against their wishes; and
• ensure a fair process for all joint tenants where one joint tenant wishes to leave the tenancy.

We have not identified any differential impact from these measures on island communities.

Part 4, Social landlords: delivery of notices etc.

This introduces a minor technical amendment to add two new and additional options for giving notice of a rent increase, namely by a tracked postal service and by being sent to the person using electronic communications (i.e. email or a secure tenant management platform). This is expected to better reflect modern communication methods and provide benefits for both tenants and landlords and was identified by social housing landlords as being a beneficial change.

We have not identified any differential impact from this measure on island communities.

Part 4, Converting older tenancies

Scottish Ministers propose to create a regulation making power which would enable a date to be set on which tenancies under the 1988 Act would convert to PRT under the 2016 Act. If this power is used, it would enable tenants with tenancies under the 1988 Act to benefit from the protections under the 2016 Act, as well as proposed protections in the Bill, and reduce complexity and confusion in the sector.

We have not identified any differential impact from this measure on island communities. There is a requirement on Scottish Ministers to consult further on this proposal before laying the regulations, and this will provide an opportunity for further consideration of any particular potential impacts on island communities and how these might be resolved.

Part 5, Social landlords pre-action requirement where domestic abuse a factor.

Measures in the Bill are designed to help protect the rights of tenants living in social housing (particularly women and children) who are experiencing domestic abuse financial control to remain in their home, or be re-housed if that is their wish, and ensure arrears accrued because of domestic abuse are not a barrier to accessing social housing in the future. Where domestic abuse in terms of financial control has had an impact on rent arrears, this would require the landlord to fully consider further actions that could assist the victim-survivor before eviction action for rent arrears can be taken in court.

These measures in the Bill are intended to:

• ensure social landlords consider domestic abuse financial control in all rent arrears cases before commencing legal action for eviction;
• require social landlords to support individuals experiencing domestic abuse causing financial arrears in a specialised manner; and
• require social landlords to confirm to the court that the new domestic abuse related requirement has been complied with if a court action for eviction on rent arrears grounds, or grounds including rent arrears, is subsequently raised.

We have not identified any differential impact from these measures on island communities. However, we know that alternative available affordable accommodation can be limited in island communities, which could exacerbate the negative impact of eviction for rent arrears as a result of domestic abuse financial control on domestic abuse victims. Measures that strengthen the protection for domestic abuse victims with rent arrears against eviction may therefore be particularly beneficial for island communities.