In recent times, the Scottish rental market has been stirred by significant changes in legislation. The Cost of Living (Tenant Protection) (Scotland) Act 2022, implemented in September 2022, introduced a rent freeze and moratorium on evictions, aiming to provide tenants with enhanced security during times of economic uncertainty. However, this legislative overhaul has not been without its share of controversy.
A Collective Challenge
A coalition comprised of prominent entities, including the Scottish Association of Landlords (SAL), Scottish Land and Estates (SLE), and Propertymark, has stepped forward to challenge the provisions of the Act. Their fundamental concern centers on the perceived imbalance and adverse impact this legislation has on landlords and the broader Private Rental Sector (PRS).
Key Concerns Raised in the Petition
The petition seeking judicial review underscores several key issues that have ignited this legal dispute:
1. Indiscriminate Rent Control Measures
The Act’s rent control measures are applied uniformly, irrespective of the financial situations of both tenants and landlords.
2. Disparity in Protection for Private Sector Tenants
The removal of the rent cap for social landlords has extended financial protection to affluent individuals in the private sector, leaving those in more challenging financial circumstances within the social sector without the same safeguards.
3. Lack of Equal Consideration for Private Landlords
While acknowledging the importance of maintaining properties in the social sector, the Scottish Government has not afforded similar consideration to landlords operating within the private sector.
4. Absence of Relief for Diverse Landlord Circumstances
The law fails to differentiate or provide relief based on the varying financial circumstances of landlords, including larger, institutional companies capable of absorbing increased costs and individual landlords who may lack such financial resilience.
5. Unintended Consequences of the Eviction Ban
While intended to address issues such as rent arrears, the eviction ban has inadvertently impacted landlord cash flow, potentially leading to a reduction in the capital value of rental properties.
Challenging the Status Quo
In addition to these concerns, the coalition petition also argues that the Act infringes upon the European Convention of Human Rights by employing discriminatory provisions. The Convention firmly asserts that the enjoyment of rights and freedoms should be secured without discrimination based on various grounds, including property association.
The Court Hearing: Insights and Arguments
On the 4th of May 2023, a pivotal court hearing unfolded at the prestigious Court of Session in Edinburgh, with the Hon. Lord Harrower presiding over proceedings.
Lord Neil Davidson KC, representing the coalition of landlords and letting agents, presented a compelling case. He emphasised that private landlords have grappled with mounting costs, particularly significant increases in interest rates, culminating in an alarming average surge of 70% in monthly repayments on buy-to-let mortgages over the past year.
Lord Davidson debunked the notion that the Act was temporary, asserting that the income losses incurred by landlords seemed to be of a permanent nature. He underscored the inherent unfairness of the Act, which obligates landlords to shield their tenants from rising costs while simultaneously bearing their own escalating expenses, regardless of their financial capacity.
Furthermore, Lord Davidson contended that the Scottish Government’s legislation unjustly discriminates against PRS landlords by treating them differently from social sector landlords. Although the rent cap has been lifted for social sector landlords, private sector landlords, in most cases, remain subject to 3% increases until at least September 2023.
The Scottish Government’s Defence
James Mure KC, representing the Scottish Government, countered these arguments by characterising the measures within the Act as “modest, time-limited restrictions” on landlords’ rights. He stressed that the Act’s primary objective was to provide support and protection to tenants during the ongoing cost of living crisis, justifying the limitation of landlords’ rights based on the collective need of tenants.
Mure emphasised that while landlords have the right to seek profit, this right does not equate to a guaranteed profit. He highlighted the inherent risk involved in being a landlord, clarifying that profit was not assured, stating, “All of them are involved in a commercial venture with some risk.”
Awaiting Lord Harrower’s Verdict
With both sides having presented their arguments, the stage is now set for Lord Harrower’s written decision, expected in early July. As soon as the verdict is delivered, updates will be promptly shared with our landlord & clients.
Supporting the Challenge
Recognising the financial challenges faced by the organisations involved in this case, a crowdfunding page has been established. If you wish to contribute or learn more, you can access the crowdfunding page through this link: Crowdfunding Page.
At Chalmers Properties, we remain committed to keeping our landlords informed and engaged in matters of significance to the rental industry. Stay tuned for further developments on this crucial issue, as the judgement is eagerly awaited.
