Scotland's First Minister announces rent freezes and a temporary ban on eviction of tenants

On 6 September 2022 and as part of the Scottish Government’s legislative programme for 2022-23, the First Minister Nicola Sturgeon announced that she will be introducing emergency legislation to the Scottish Parliament to freeze rents and place a temporary ban on evictions through winter in an attempt to tackle the cost of living crisis.

The First Minister has introduced these measures to assist tenants in what she described as a “humanitarian emergency”.  The measure will apply to both private and social tenants and are expected to remain in place until at least 31 March 2023.

Whilst the aims of such measures are understandable, many commentators wonder if the consequences of a “blanket ban” have been fully thought through.  Nicola Sturgeon has responded to such criticism in bullish terms saying everyone in the country needs to play their part in this crisis.  As such we consider this ban will come into force.

Furthermore, this appears to be the start of a package of measures being brought forward to assist people with the cost of living crisis with the Accountant in Bankruptcy announcing today that they will not allow an application to revoke a Debt Payment Plan if it can be demonstrated that the cost of living crisis has impacted on the individual’s ability to maintain contributions.

What does this mean for lenders in relation to buy to let property?

Before any action can be taken to recover possession of residential property in Scotland a court order needs to be obtained against the customer ie the registered owner.  If the property is tenanted, this court order against the customer cannot be used to remove a tenant.  There is a separate process for removing a tenant.  As you will be aware, the LPA Receiver route is not available in Scotland.

The process for removal of a tenant will depend on the type of tenancy that is in place ie short assured/assured tenancy (Assured tenancy) or a private residential tenancy (PRT).

Under a PRT a lender has the ability to serve a notice to leave (NTL).  This is expressly allowed under the legislation.  For Assured Tenancies we recommend a careful consideration in deciding whether to issue the appropriate termination notices in light of the potential risks with adoption of landlord responsibility.  Each case is assessed on its merits.

Early proactive discussions with the tenant, providing them with time to voluntarily move out of the property can often mean that vacant possession is obtained without serving the NTL.

On expiry of the termination notices, and in the event the tenant does not voluntarily remove, the lender can apply to the First Tier Tribunal, Housing and Property Chamber (FTT), for a court order against the tenant on the basis that the lender wishes to sell the property.  This will be granted where the FTT consider it reasonable to do so.

Whilst we await the detail of this emergency legislation we think it is likely that lenders will not be able to obtain an order to remove tenants under a residential lease agreement until at least 31 March 2023.

It is not clear whether this measure will also impact “unauthorised tenants” who reside in a residential property under a tenancy that has not been agreed to by the lender.  We would anticipate that if they produce a valid lease it is likely they will be protected.  We will confirm as soon as possible.

This ban is not in force as yet and the FTT has confirmed to us that they await further information from the Scottish Government, but at this time they are proceeding as normal.

As a last resort, it may be necessary to consider selling a residential property with a tenant remaining but we would assess this on a case by case basis in conjunction with you to determine the appropriate strategy.

In the meantime, we have reviewed all matters involving evictions and if we have concerns about a tenant being in occupation will be in touch separately to discuss.

Please feel free to contact our Louise Chopra, Partner (Louise.Chopra@tlt.com) or Louise Ward, Associate (Louise.Ward@tlt.com) to discuss any of the above.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at September 2022. Specific advice should be sought for specific cases. For more information see our terms & conditions.