Transitional Measures Proposed as Rent Cap Ends
Regulations to protect tenants concerned about rent increases following the ending of the emergency rent cap have been laid in the Scottish Parliament.
The temporary rent cap and eviction moratorium protections brought in by the Cost of Living (Tenant Protection) Act 2022 will no longer apply from 1 April 2024. This final date is built into the legislation and cannot be extended further.
From 1st April onwards, subject to parliamentary approval, the process for rent adjudication will temporarily be modified for one year.
Any tenant who wishes to dispute a rent increase notice can apply for rent adjudication. In such cases, Rent Service Scotland or the First-tier Tribunal will set rent based on the lowest of the following three figures:
- the open market rate
- the rent requested by the landlord
- and a comparator based on the difference between the market rate and current rent
The Scottish Government has done the right thing in protecting tenants through the pandemic and Tory cost-of-living crisis.
GRAEME
While the measures currently in place cannot be extended further, this government is determined to continue its much greater degree of support for tenants than elsewhere in the UK.
Of course, the matters of tenants’ rights and managing rental costs is something the SNP government is looking at in the longer-term with upcoming broader legislation in the area of housing.
I look forward to the progression of proposals through the parliamentary process.
Our emergency legislation has led the way in the UK in capping in-tenancy rent increases, protecting tenants across Scotland from the worst impacts of the cost-of-living crisis. However, Parliament set a final deadline for these temporary protections to come to an end from 1 April 2024.
TENANT’S RIGHTS MINISTER, PATRICK HARVIE
From 1 April we are proposing temporary changes to the way rents are decided when tenants challenge a rent increase to provide a level of protection for private tenants which remains far greater than anywhere else in the UK. It will also enable landlords to react to an increase in costs and reinvest in our private rented sector.
At the same time, we are committed to bringing in a long-term system of rent controls and creating new rights for tenants through our forthcoming Housing Bill.
Background
The Cost of Living (Tenant Protection) (Scotland) Act 2022 (Saving Provisions) Regulations 2024
The Rent Adjudication (Temporary Modifications) (Scotland) Regulations 2024
Until 1st April, private rents are capped at 3% – or 6% in exceptional circumstances. The protection applies to all applicable Rent Increase Notices issued on or before 31 March 2024.
The proposed regulations would temporarily modify the rent adjudication process for 12 months so that on making a decision on adjudication, the rent officer would use a rent taper formula which can be summarised as below:
- If the gap between the market rent and the current rent is 6% or less, then the landlord can increase the rent by the proposed amount, as long as this is not more than the market level.
- If the gap between the market rent and the current rent is more than 6%, the landlord can increase the rent by 6% plus an additional 0.33% for each percent that the gap between the current rent and market rent exceeds 6%, as per the formula set out in the Rent Adjudication (Temporary Modifications) (Scotland) Regulations 2024. However, the total rent increase cannot exceed 12% of the current rent.
- Both cases are also subject to the requirement that RSS and the FTT cannot set a higher rent than that requested by the landlord.
Illustrative Worked Examples:
Below are a selection of illustrative worked examples of the approach that would apply under the Rent Adjudication (Temporary Modifications) (Scotland) Regulations 2024. They present different hypothetical scenarios of rent increases under the proposed approach, illustrating how the taper approach would apply where the difference between current rent and open market rent is between 6% and 24%. Each example considers what would happen were a tenant to refer a rent increase for adjudication.
Example 1
- A landlord sets a new rent which is 5% higher than the current rent. The landlord believes the difference between current rent and the open market rent is 5%. Rent increases up to and including 6% are permitted, as long as the new rent does not exceed the open market value. If the tenant took the case to rent adjudication and the open market rent value was confirmed at this 5% level or above, then the rent increase of 5% would be approved. If the rent adjudication concludes the open market rent is lower than the rent proposed by the landlord, rent would be set at the open market level.
Example 2
- A landlord sets a new rent which is 8% higher than the current rent. The landlord believes this 8% increase would bring the rent up to the open market value. Rent increases are subject to the taper approach if the proposed rent increase is above 6% of overall rent. If the gap between the current rent and open market rent is 8%, then the rent increase would be capped at an increase of 6.7% higher than existing rent.
Example 3
- A landlord sets a new rent which would be 15% higher than the current rent. The landlord believes the open market value is 25% above the current rent. Rents cannot rise by more than 12%. If the gap between current rent and open market rent is more than 24%, rent increases are capped at 12% higher than existing rent. If the tenant took the case to rent adjudication and it was confirmed that the open market value was 24% or higher than the current rent, then the rent increase would be set at an increase of 12% higher than existing rent.
Example 4
- A landlord sets a new rent which is 15% higher than the current rent. The landlord believes the open market value is 15% higher than the current rent. Rents cannot rise by more than 12%. If the gap between the current rent and the open market rent is 15%, then the rent taper formula is applied and the rent increase is capped at 9% higher than existing rent. If the tenant took the case to rent adjudication and it was confirmed that the open market rent was 15% higher than the current rent, then the allowable rent increase would be set at 9% higher than existing rent.
