SCOTTISH EVICTION LAWS TO CHANGE?
Coronavirus (Scotland) Bill offers more protections for tenants, but beware the dangers of unintended consequences
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Post-covid syndrome - long covid - is where a person cannot shake off the effects of the virus months after initially falling ill. It can be debilitating, painful and medically it’s long term implications are still not fully understood. But ‘long covid’ could equally be a practical phrase referring to non-medical after effects of the pandemic. The lingering effects that the pandemic has caused Scottish businesses and households aftershocks which they are struggling to shake-off.
One such example of debilitating effects that continue to ripple across the Scottish economy is concerning the housing market. More specifically, the private rental sector.
During the pandemic emergency measures were put in place to protect tenants from eviction. The logic was absolutely sound, given the unforeseeable financial stress many thousands of households suddenly found themselves labouring under, rules were changed to protect them from eviction.
The rules in Scotland were altered, to recognise that some tenants would not have paid rent because they were in financial difficulties due to Coronavirus-related restrictions. So, rules were changed so that the Housing Tribunal would have a discretion in regards to evictions.
Prior to ‘long covid’ causing huge economic and societal dislocation, landlords could enjoy certain “mandatory” grounds for eviction. For example, if a landlord brought an eviction action on the ground that the tenant was in three months of arrears of rent, the Housing Tribunal did not have any discretion. The Tribunal was compelled to order the tenant to be evicted.
But during the pandemic, this was changed, so that the Housing Tribunal could not be compelled in such a situation. In short, the “mandatory” was altered to “discretionary”. If the Housing Tribunal was of the mind that the reason for non-payment of rent was because of the pandemic, it could decide not to evict.
Fast-forward to today and the Coronavirus (Scotland) Bill seeks to make this shift from “mandatory” to “discretionary” more permanent. Effectively, what the Scottish Government is seeking to do is to make it harder for private landlords to evict. Instead, eviction should become seen as something of a last-resort after landlords can show to the Housing Tribunal’s satisfaction that all other courses of action have been exhausted.
As Scottish solicitor law firm Wright, Johnston and MacKenzie summarise,
“before bringing an eviction action, a landlord will need to show compliance with a Pre-Action Protocol to be set out by the Scottish Ministers. The intention here is to require landlords to exhaust other options before seeking to evict a tenant, such as allowing them time to pay arrears. If an eviction action is brought but the Tribunal is not satisfied that the landlord has done enough to comply with the Protocol, the Tribunal will be entitled to refuse to order eviction.”1
Naturally, for millennials - known as ‘generation rent’ due to being priced out of the housing market - this may come as some good news. Strengthening tenants rights in situations where they are behind in their rent is certainly a case of welcome news being a welcome guest. For many working families struggling under the cost of living crisis, this could offer a lifeline.
But, it is prudent when analysing possible changes to any status-quo-ante what the unintended consequences might be. Before implementing a reform ask yourself: ‘what are they ways this could go wrong?’ After all, it is far easier to make something which is operating reasonably well, much much worse than it is to make it better.
One potential for danger is a reduction in available homes for rent in Scotland. According to the Scottish Association of Landlords and Scottish Land and Estates
“There is a very real danger that if this goes ahead landlords will lose confidence and simply sell homes at a time when they are in great need.”2
An initial reaction might be to scoff, penning the opposition down to a selfish desire by landlords to retain the whip hand over recalcitrant tenants in arrears. But, when one thinks from another angle, would you wish to rent property you owned if you theoretically might not be capable of getting it back?
Imagine you are an older person nearing retirement and own a handful of single bedroom homes for rent. You only have a state pension, no private pension to speak of, and the rent generated by the small property portfolio is your retirement. Now imagine the situation after the mandatory evictions rule regarding tenants in three months or more arrears is imposed. Would you keep these homes for rent? I doubt it, far more likely you offload them. Selling them off, reducing the overall percentage of available homes for rent.
The last thing generation rent needs is diminished supply of homes for rent. Reduce supply while demand remains high or even growing and you know what happens. Prices go up. It’s the law of the market, the way demand is reduced when it exceeds available supply of finite goods is to price people out of the equation.
Here in Glasgow we can already see over many years this effect playing out - even prior to our new inflationary crisis. Since 2010 Greater Glasgow has seen cumulative rent rising by 41.4 per cent. Well ahead of inflation, but certainly driven by surging demand for rental properties as a whole generation is priced out of ever hoping to purchase their first home.
Do you expect rent growth to slow if you remove the rights of private landlords to enjoy mandatory eviction in cases of arrears? If anything, the new legislation as proposed risks driving more private landlords out of the rental sector, thus further exacerbating the shortage of available homes for rent. Make the shortage of housing for rent worse puts more pressure on rent rates - which are already surging.
Do not misunderstand me, overall, the changes in relation to residential tenancies will be of benefit to tenants, and will make it harder for landlords to evict. This is laudable and I thoroughly support changes that make eviction a last resort as opposed to a first response in cases of rental arrears of three months or more. But just beware of the dangers of unintended consequences.
(2022, 1 February), Wright, Johnson & MacKenzie solicitors, https://www.wjm.co.uk/news/the-implications-the-coronavirus-scotland-bill
Conor Matchett (2022, 27 June), ‘Landlords claim strengthening of tenant rights could 'decimate' rental market’, The Scotman, https://www.scotsman.com/news/politics/landlords-claim-strengthening-of-tenant-rights-could-decimate-rental-market-3745864