Transitional measures proposed as rent cap in Scotland ends

Regulations to assist renters concerned about rent rises following the termination of the emergency rent cap have been introduced in the Scottish Parliament.

The rent adjudication process will be temporarily amended for one year beginning on April 1 2024, subject to parliamentary approval.

Any tenant who intends to contest a rent increase notice may file for rent adjudication. In such circumstances, Rent Service Scotland or the First-tier Tribunal will set rent using 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 the current rent

Tenants’ Rights Minister Patrick Harvie said:

“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.

“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.”

Credit – https://www.gov.scot/news/continuing-rent-protection-for-private-tenants/

The Cost of Living (Tenant Protection) Act 2022’s interim rent ceiling and eviction moratorium provisions will expire on April 1, 2024

This deadline is written into the statute and cannot be extended further. Until then, private rents are limited to 3% – or 6% under extraordinary circumstances. The protection applies to all eligible Rent Increase Notices issued on or before March 31, 2024. The extra eviction safeguards will also expire at this point.

If a tenant is concerned about the level of a planned rent rise, they can discuss it with their landlord or agent and then apply to a rent officer at Rent Service Scotland, or the First-tier Tribunal if relevant, for a rent adjudication.

The regulations would temporarily modify the rent adjudication process for 12 months, requiring the rent officer to employ a rent taper formula, which can be described as follows:

If the gap between the market rent and the current rent is 6% or less, then the landlord may increase the rent by the proposed sum, as long as this is not more than the current 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 per cent 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 must not exceed 12% of the current rental cost.
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 examples

Below is a selection of illustrative worked examples of the approach that would apply under the Rent Adjudication (Temporary Modifications) (Scotland) Regulations 2024 from the gov.scot website. 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 the 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.