Following on from the blogs about the Cost of Living (Tenant Protection)(Scotland) Act 2022 (the Act), one area that has resulted in more questions than perhaps any other is around the rent freeze or cap. The current rent cap is set at 0% although it could be varied in the future. This blog will focus on Private Residential Tenancies rather than any other form of tenancy type although similar rules apply to older tenancies governed by the Housing (Scotland) Act 1988 and the statutory rent increase procedure applicable to them (although there is the additional requirement of terminating any contractual tenancy to factor in). Also, as mentioned in the last blog, nothing in the Act prevents contractual rent increases taking effect in such assured or short-assured tenancies.

What rent increases are affected?

Any standard Rent Increase Notice (RIN) given/served on or after 6 September 2022, will be of no effect and the existing contractual rent will remain payable.

What rent increases are not affected?

Any RIN served on a tenant on or before 5 September 2022 are still valid and any increased rent will become payable subject to any determination by a rent officer and/or referral to the First-tier Tribunal.

What about exceptions?

The Act allows for landlords to apply to a rent officer to recover up to 50% of any increase in prescribed property costs in the six months immediately preceding any such application. This is subject to any increased rent being no more than 3% of the total rent payable. If there has been a rent increase within the last 12 months, then you will have to wait for 12 months to expire before making such an application.

What are the prescribed property costs?

The Act lists three such prescribed costs (although more could be prescribed). These are increases in:

  • Mortgage interest payable;
  • Landlord insurance; and
  • Certain service charges.

The increase in mortgage interest must relate to the let property itself and it is only the interest element of such costs that can be recovered. Increases in interest will need to be evidenced.

In terms of landlord insurance, this relates only to increases in premiums payable for policies and not new insurances purchased. It also does not include building and contents insurance. It will therefore cover insurances like rental guarantee insurance, landlord liability and vacant property cover. Again, such increases will need to be vouched to show the increase applicable to the let property.

For increases in service charges, these must relate to the let property and will cover things like factoring fees, maintaining communal areas and facilities and utilities for communal facilities. Again, this will need to be evidenced. Further, landlords will have to show that the charge is the responsibility of the tenant under the lease.

What is the process?

As mentioned already, the landlord requires to make an application to a rent officer and still needs to give three months’ notice. Before lodging the application (or at least at the same time), the tenant should be notified in writing of the application and provided with certain information including a statement of the proposed rent, that it is an increase of more than the permitted rate as well as other information about when the rent increase can take effect. This should be by the agreed communication method set out in the lease and could therefore be by email if that is what is agreed.

The application form is fairly self-explanatory and sets out what is required to support the application.

If the application is granted, then the rent officer will issue their determination/order. If that determination is issued not less than 14 days before the expiry of the three months’ notice period, then the new rent will be payable on the expiry of that three month notice period. If issued after the three month period, then it will become payable 14 days after the date of the order.

If there is appeal to the First-tier Tribunal (by either party and within 14 days of the date of the rent officer’s order), no increased rent is payable until the Tribunal has determined the rent payable under the tenancy.

The application form, the template letter and formal guidance can be found here.

Can you issue pre-emptively Rent Increase Notice now to take effect on 1 April 2023?

Leaving to one side the question of whether the Act and any rent cap contained therein will be continued beyond 31 March 2023 or not, the answer is that, whilst the rent cap under the Act is set at 0%, the provisions under the Private Housing (Tenancies) (Scotland) Act 2016 that allow landlords to issue RINs other than in relation to increases in the prescribed property costs have been disapplied. That means landlords cannot issue a standard RIN now in the hope that the rent cap may be lifted come 1 April 2023. That being the case, once allowed, any standard RIN issued will be subject to the normal three month notice period.