The Coronavirus (Scotland) Act 2020 came into force on the 7th April 2020, bringing with it, amongst others, significant changes to housing legislation in Scotland. These changes applied to Private Residential, Assured and Short Assured Tenancies alike, increasing most of the notice periods for the repossession of residential tenanted property to up to six months and amending all grounds for eviction to discretionary, as opposed to mandatory.  In effect, these changes meant that any claim by a Landlord for possession had to be determined by the First Tier Tribunal and an eviction would be only granted by reference to ‘reasonableness’. Landlords were additionally required to follow ‘pre-action’ protocols from 30th September 2020, where a tenant was in rent arrears, which included the provision of clear information on a potential repayment plan and other forms of financial support to the tenant, such as the Tenant Hardship Loan Fund.  This communication would then be looked at as evidence of ‘reasonableness’ when the Tribunal was assessing the case.

 

These legislative changes were initially brought in during the early stages of the Coronavirus, when the true effects of the pandemic were yet unknown. The rationale was to prevent homelessness, amidst concerns that some unemployed or self-employed tenants may struggle to fulfil their rental obligations.

 

Notice periods to terminate residential tenancies returned to their original form from 30th March 2022 (two months for Short Assured Tenancies, 28-84 days for Private Residential Tenancies), however the pre-action protocols remain in place, and all grounds to terminate remain discretionary, having been extended to 30th September 2022 by the Coronavirus (Scotland) Acts (Amendment of Expiry Dates) Regulations 2022. These changes will become permanent for all residential leases after this date if enacted by Part 4 of the Coronavirus (Recovery and Reform)(Scotland) Bill. The principal change here is in relation to Short Assured Tenancies, where prior to the Coronavirus, tenancies could be brought to an end at the end of the fixed term on the mandatory “no fault” ground. Under the proposed legislation all actions for re-possession would permanently require First Tier Tribunal determination.

 

The justification given by the Scottish Government for these changes to be made permanent are that the pandemic has caused a reduction in household incomes and the changes brought in under the 2020 Act made the system more equitable, despite there not having been a sufficient review period to gauge this.

In reality, Patrick Harvie has stated that only 6% of the (£10,000,000) Tenant Hardship Loan Fund had been awarded in November 2021, to 233 households, and in the last year 94% of eviction applications that proceeded to the Tribunal, resulted in an order being granted. One might question, if 94% of cases were awarded by the Tribunal, whether the referral of all applications is an efficient use of judicial resources. Presumably there will be lengthy delays in the judicial process, and therefore to landlords realising vacant possession, extending beyond the original notice periods, all of which will require sufficient public (and private) funding.

Understandably there are concerns that this will negatively impact the property market, causing a shortage in rental housing, with both lenders and landlords alike unwilling to engage and invest in residential property when vacant possession cannot be realised, entirely reliant upon the First Tier Tribunal and the ‘reasonableness’ test. A housing shortage would also have the effect of driving up market rents, detrimental to the tenants that the legislation is intending to protect. A comparison may be drawn with the legislative changes brought in in relation to agricultural tenancies, where it is widely felt that the security of tenure now afforded to agricultural tenants has caused higher rents and a shortage of available land to rent on a longer term.

The Bill is currently in Stage 1, where its provisions and the views submitted in response to its provisions, are under consideration. Membership bodies such as Scottish Land & Estates continue to lobby against its implementation as presently drafted and we await what form, if any, the final piece of legislation will take. However, in addition to the upcoming introduction of minimum EPC regulations, the new proposed housing standard contained within the Scottish Government’s ‘Housing to 2040’ strategy, and the rent control measures recommended in the most recent SG consultation paper ‘A New Deal for Tenants’, there is a continual and very clear shift in policy which would seem likely to discourage  property owners from making property available in the long term letting market .

As a landlord or managing agent of residential property, these changes require careful consideration as to future management strategy and any long term investment in residential property.