Private tenancies: rebalancing or just upheaval?

The Private Housing (Tenancies) (Scotland) Act 2016 came into force on 1 December.

Its stated aim is to create simpler tenancies in the private sector, offer stability and security for private tenants and ensure predictability over rent increases. It also fundamentally changes the nature of the relationship between landlords and tenants from contractual to statutory. We have a new tenancy type called a private residential tenancy (PRT), which replaces the current tenancies in the private sector, namely the regulated, assured and short assured tenancies. The Scottish Government has prepared a “model” tenancy agreement which is available online.

“Rebalancing” tenancies

The main measures introduced by the legislation include:

• enhanced security for tenants, with the loss of the misnamed “no fault” ground, which allows landlords under short assured tenancies to seek possession of a property on the basis that the agreed period of let has come to an end; 
• no requirement to set an “ish” (or end date) for a tenancy;
• no minimum period of let;
• new grounds for recovery of possession, some mandatory and some discretionary; 
• rent increases limited to once every 12 months, with a right for tenants to refer disputed increases to a rent officer; 
• the opportunity for local authorities to implement restrictions on rent increases in areas where there are excessive increases, by the creation of “rent pressure zones”; 
• simplification of notice requirements prior to eviction action being taken, with the replacement of the current range of notices (notices to quit, s 33 notices and s 19 notices (AT6)) by a new single notice to leave;
• two notice periods for landlords and one for tenants; 
• no need for pre-tenancy notices;
• transfer of jurisdiction over disputes arising from private sector tenancies from the sheriff court to the First-tier Tribunal (Housing & Property Chamber); and introduction of a suggested “model tenancy agreement” with mandatory clauses. 

The Housing Minister has stated that the Act was necessary to “rebalance” the relationship between landlords and tenants. Reception has been polarised between tenant and landlord groups, the latter warning that the balance has shifted too far in favour of the tenant and of a likely reduction in investment as landlords flee the sector, and the former largely happy with enhanced security of tenure. Only time will tell whether the Act will achieve what the Government has set out to do and what impact, if any, it will have on investment and therefore the choice available for tenants.

The 2016 Act provides that a tenancy cannot be an assured or short assured tenancy if it is granted on or after 1 December 2017. This means that from that date all residential tenancies let to individuals will, by default, constitute PRTs unless an exemption applies. These include tenancies at a low rent, public and military housing, holiday lets and lets to students by registered educational institutions and “institutional providers of student accommodation” – a landlord who lets accommodation which consists of a building/complex with at least 30 rooms which are predominantly let to students.

Existing assured and short assured tenancies will continue in force until terminated.

Security of tenure

The new PRT offers significant security of tenure to tenants. The no-fault eviction basis available under the short assured tenancy regime will not apply. PRTs will not have an end date and cannot be terminated at the landlord’s instigation unless there is a ground for eviction. In effect, PRTs will be open-ended. Tenants will be entitled to terminate by giving notice to the landlord. The Act prescribes a period of 28 days’ notice, but allows for an alternative period to be agreed between the parties in the tenancy agreement.

In order to instigate recovery of the property, the landlord must serve on the tenant a prescribed notice called a “notice to leave”, specifying one or more of the 18 grounds for eviction set out in the Act and also the date on which the landlord expects to be able to apply to the tribunal for an eviction order. There are specific requirements in ss 54 and 62 of the Act relating to the date to be specified in the notice to leave, which may cause the notice to be invalid. Full discussion of this matter is beyond the scope of this article, but landlords and agents should take great care.

Tenants must be given a minimum period of notice before eviction action commences. Two different periods are prescribed in the Act. The notice period is 28 days if the tenant has lived at the property for less than six months or if one of the six “tenant conduct” eviction grounds applies. In all other cases, the notice period is 84 days.

Termination: mandatory or discretionary?

If the tenant fails to vacate at the end of the notice period, the landlord can apply to the First-tier Tribunal (Housing & Property Chamber) for an eviction order.

The eviction grounds are split into four categories: 

• let property required for another purpose;
• tenant’s status;
• tenant’s conduct; and 
• legal impediment to let continuing. 

The majority of the grounds are mandatory, but some discretion exists in certain grounds. If a mandatory eviction ground is established on the evidence presented, the tribunal must grant an eviction order without any consideration of whether it is reasonable in the circumstances. 

The main mandatory grounds include:

• the landlord intends to sell the property;
• the landlord intends to live at the property as their principal home for at least three months;
• the landlord intends to use the property for a non-residential purpose;
• the tenant is no longer occupying the property;
• the tenant has been in rent arrears for three or more months, with the total arrears being equal to (or more than) one month’s rent (and those arrears are not wholly or partly a consequence of a delay or failure in the payment of a relevant benefit);
• the tenant has a relevant criminal conviction.

If a discretionary ground is established, the tribunal will only grant an eviction order where it considers it is reasonable in the circumstances to do so. The tribunal must be persuaded that eviction will be reasonable in the circumstances. 

Some of the main discretionary grounds are:

• a member of the landlord’s family intends to live in the property;
• the tenant is in breach of the tenancy agreement;
• the tenant is involved in antisocial behaviour;
• the tenant has an association with someone who has a relevant conviction or is involved in antisocial behaviour.

Tribunal eviction process

The question on everyone’s mind will be: How quickly can the First-tier Tribunal turn around an eviction action?  

At the moment there is no indication of exactly how long it will take to process eviction orders, but the intention is that the tribunal should be quicker than the court, as it will specialise in these matters.

The tribunal process will commence by the completion of an application from which will be available from its office or website (www.housingandpropertychamber.scot). The form is designed to be simple to use, and will seek relevant information and ask for specified documents (e.g. copy of tenancy agreement, copy of notice to leave) to be lodged as required by the Act and the tribunal rules.

It is intended that a case management discussion will be set in most cases, which will allow the tribunal to ascertain the issues in dispute. The initial discussion will be conducted by a legal member of the tribunal sitting alone. If necessary a full hearing will be fixed where evidence can be led. The intention is that the period of time from the lodging of the application to the case management discussion will be approximately four to six weeks, with the full hearing taking place at a date again approximately four to six weeks later. Full tribunal hearings will be conducted by a legal member supported by an ordinary member.

Eviction orders granted by the tribunal will be enforced by sheriff officers in a manner similar to the current process.

Sanctions against wrongful termination

Many of the grounds for eviction under the new tenancy differ from those under the current regime. The majority are mandatory. That creates the possibility that certain landlords may abuse the process by seeking eviction based on grounds which do not truly exist. For example, it is entirely possible that a landlord may obtain an eviction based on the ground that the landlord intends to sell the property while actually having no intention to do so. They may be using it to replace an tenant with another tenant who could be charged a higher rent, to get round the restrictions on rent increases which exist in the new regime.

The Act accordingly introduces a new type of order called a “wrongful termination order” (WTO). This order is available to allow a tribunal to impose a penalty on a landlord where it later transpires that the landlord misled the tribunal into granting an eviction order. A WTO can be made if a tenant has left a property without an eviction order being made, after being similarly misled by a landlord. In making a WTO the tribunal can order that a penalty of up to six months’ rent is paid by the landlord to the tenant. Any such order will also be notified to the relevant local authority and may have a significant impact on the landlord’s registration status. 

It is impossible in an article of this length to cover every aspect of this new tenancy regime, and reference should be made to the legislation itself and to the significant information for landlords and tenants which is available on the Scottish Government website at beta.gov.scot/policies/private-renting/private-tenancy-reform/

These changes are the most significant upheaval in private sector tenancies for 30 years, and the move from the court as the arena for dispute resolution to the tribunal will be very interesting. Regulations allowing legal aid to be granted for this tribunal are in place. It is not beyond the realms of possibility that at tribunal we will be faced with the unusual situation where the majority of landlords are trying to “go it alone”, against tenants who will be represented by lawyers/advisers from various agencies.