One of the new concepts that the private rented sector in Scotland got with the introduction of the Private Housing (Tenancies) (Scotland) Act 2016 (2016 Act) was that of Wrongful Termination Orders (WTO). The ability for tenants to seek a WTO is intended to police the misuse of grounds for possession by landlords by allowing the First-tier Tribunal to impose a penalty on landlords of up to an equivalent of six months’ rent for any such misuse. WTOs only apply to private residential tenancies and not older tenures such as short-assured tenancies. Whilst it has been possible for tenants to seek Wrongful Termination Orders since 1st December 2017, there have been very few cases where tenants have sought WTOs until fairly recently. This could in part be down to the fact that tenants have to initiate proceedings to seek such an order, but it could also be down to the fact that tenants, as a whole, are now becoming more aware of their ability to seek such an order. It could also be down to the previous Covid rules whereby the more commonly used grounds had their notice periods increased substantially (for example rent arrears from 28 days to six months), meaning landlords look at other possible grounds with shorter notice periods to recover possession.
When can Wrongful Termination Orders be made?
The power for a tribunal to issue a WTO is set out in sections 57(3) and 58(3) of the 2016 Act and covers the situation where either the tribunal itself is “misled” into issuing an eviction order, or where a tenant is “misled” into vacating a property after receiving a Notice to Leave from a landlord. The classic example is where a landlord serves a Notice to Leave on the basis that they want to sell the property and, immediately after the tenant vacates, advertises the property for relet.
Can a landlord change their mind after issuing a Notice to Leave due to changes in circumstances?
Despite some interesting earlier decisions from the First-tier Tribunal, the short answer to that question is yes. The tribunal has to consider where faced with such a question, what the landlord’s intentions were when the Notice to Leave was served. This was the issue in a recent application for a WTO. In this case, the Notice to Leave was served on the basis that the landlord wanted to sell the property. The tenants vacated on 16th December 2022, but by 6th January 2023 the property was being marketed for let. The tribunal considered the issue and noted that the stated intention of the landlord when the Notice to Leave was issued, that they wanted to sell, was not disputed by the former tenants (it was accepted that the landlord had been “panicked” into issuing the Notice to Leave by financial advice she had received). The tenants concern was that they felt that as they had been put to “cost and inconvenience” and that they should be “protected” from this type of situation.
The tribunal disagreed and stated that: “The key condition for the grant of an order is that the former tenant must have been misled. In effect, what the section requires is that the tenants are persuaded by some trickery or deception to give up their rights to the property… that the respondent’s circumstances subsequently changed shortly thereafter, is perhaps unfortunate, but it does not invalidate the legitimacy of her intentions when Notice to Leave was given, or indeed when the applicants removed from the property.”(sic)
This of course does not mean that a landlord can simply claim a change of heart and avoid a WTO. Where such a claim is made (and not accepted by the former tenants) the tribunal will scrutinise the landlord’s reasons and actions (including when those circumstances changed) to determine whether they believe such a claim.
What should a landlord do where their circumstances change?
Well, it will depend on the ground used. If we consider the most common ground that the landlord wants to sell, then assuming the tenants have not vacated or been evicted at the point the circumstances change, then it would seem sensible to intimate the tenants as soon as possible and offer to continue letting the property to them. If, by that time, the tenants have already found a new property and subsequently move on, whilst not guaranteeing that there will be no WTO, it perhaps would point to good faith on the part of the landlord. A landlord should also be encouraged to retain as much information as they can to explain their change of heart or circumstances should such a claim come. This would also apply to situations where the landlord is forced to abandon plans, such as selling the property, because they are unable to do so (for example in a slow market). In such circumstances, full records of contracts with estate agents, home reports, particulars and even viewings, and any offers made and rejected (including why they were rejected) may be useful.
If you require any further information or advice, please contact us.