Cost of Living Challenge for Landlords

Restrictions on landlord’s ability to review rent and enforce evictions have been extended beyond the 31st March 2023 deadline.

Baird

Whilst the eviction ban remains firmly in place, there are some changes to the Cost of Living (Tenant Protection) (Scotland) Act. From the 1st April 2023, the rent cap increased from 0% to 3%. This change is applicable to all Private Residential Tenancies, and Assured and Short Assured Tenancies, except where an assured tenancy lease clause dictates how the rent is to be reviewed, for example by specifically referencing Retail Price Index, or otherwise. In these circumstances the lease would take precedence. The rent can also only be reviewed when out-with the contractual term.

Other exceptions include new tenancies, regulated tenancies, agricultural tenancies and commercial tenancies.

There is a further exception to the 3% cap where the landlord is facing extreme financial hardship, and may apply to the rent officer for up to a 6% increase or 50% of the increased costs they are facing. It is not clear how long this process would take, or the likely success of such an application, or whether the additional time and professional fees associated with the claim would outweigh the maximum 6% increase in rent.

These restrictions are against a backdrop of soaring inflation, the RPI increase in the last year was 13.8%, and costs across every sector have increased, including compliance, insurance, repairs, and any associated professional fees attached to residential letting.

Basic property maintenance and repair costs have risen by between 15% and 30% over the last year, a boiler alone can cost between £4,000 and £8,000 to replace, including labour, all of which the additional 6% will certainly not cover.

In effect, this will mean that Landlords, beyond fulfilling basic compliance requirements, are unlikely to carry out any improvements to properties, not least the energy efficient improvements required to properties to meet the minimum standards by 2025, thereby reducing the standard of the already dwindling existing rental property stock.

The Scottish Government, in recognising the need for landlords to invest in “essential services such as home improvements and maintenance” have lifted the rent controls in relation to social housing, but have not extended this to the private residential sector.

These restrictions remain in place until the 30th September 2023, at which point they may be extended for a further 6 month period, and whilst a petition seeking judicial review of the legislation has been submitted to the Court of Session by the Scottish Association of Landlords, Propertymark and Scottish Land and Estates, the upcoming introduction of the new Housing Bill is likely to replicate a similar legislative position. In the meantime, the use of holiday lets, despite the time and expense associated with the new short term licensing scheme, becomes an increasingly attractive prospect. n