Was Scotland’s Rent Freeze Lawful?

Following the implementation of the Cost of Living (Tenant Protection) (Scotland) Act 2022, where the Government introduced a rent freeze and moratorium on evictions in September 2022, a legal challenge has been raised by a coalition of landlords and letting bodies. The Scottish Association of Landlords (SAL), Scottish Land and Estates (SLE), and Propertymark believe the law is disproportionate and unfair to landlords and the Private Rental Sector. 

      

 

The petition seeking judicial review highlighted the following:

 

• The rent control applies irrespective of the tenant and landlord's financial position.
• The decision by the Scottish Government to remove the cap for social landlords means a well-off individual renting in the private sector is provided financial protection, that is not available to those in more challenging financial circumstances in the social sector.
• In the decision to remove the rent control in the social sector, the Scottish Government acknowledges the need to maintain these properties. Still, it has yet to give the same consideration to landlords in the private sector.
• The law does not make any distinction or provide relief based on different circumstances of landlords, between larger, institutional companies who might be able to shoulder increased costs and individual landlords who cannot.
• The eviction ban delays addressing matters such as rent arrears which adversely impacts landlord cash flow culminating in a reduction in capital value.

The petition also argues that by discriminating in the way it does, the law breaches the European Convention of Human Rights, which states, “The enjoyment of rights and freedoms set forth in the Convention shall be secured without discrimination on any grounds such as…..association with….property..”

 

On 4th of May 2023, the court hearing took place at the Court of Session in Edinburgh, presided over by the Hon. Lord Harrower.

 

Lord Neil Davidson KC gave evidence on behalf of the coalition of landlords and letting agents. He argued that private landlords had faced increased costs, including, in many cases, significant increases in interest rates, with data showing monthly repayments on buy-to-let mortgages rising by an average of 70% in the past 12 months.

 

He suggested that the claim the 2022 Act is temporary is illusory in that the loss of income to landlords is permanent.

 

He went on to say that the Act is inherently unfair as it forces landlords to shield their tenants from rising costs and bear their own rising costs, irrespective of the landlord’s financial position.

 

Lord Davidson further argued that in treating social sector landlords differently from private sector landlords, the Scottish Government’s legislation illegitimately discriminates against landlords in the PRS. The rent cap has now been lifted for social sector landlords, but private sector landlords are, in most cases, restricted to 3% increases until at least September 2023.

 

Responding on behalf of the Scottish Government, James Mure KC stated that the measures in the Act were “modest, time-limited restrictions” on the ability of landlords to increase rent and evict tenants. He argued that the objective of the Act in providing support and protection to tenants during the cost of living crisis is sufficiently important, having regard to the position of tenants as a class to justify the limitation of landlords’ rights.

 

He further argued that while landlords have the right to seek a profit, they do not have the right to make a profit. He stated that some element of risk is involved with being a landlord, and profit is not guaranteed, telling the court, “All of them are involved in a commercial venture with some risk.”

 

Having presented the case, we now await Lord Harrower’s written decision on which is likely to be issued around the beginning of July. As soon as we are made aware of the outcome, we will look to update our landlords with this information.

 

As none of the organisations raising this case have the financial resources to challenge the Scottish Government alone, they have set up a crowdfunding page. Please find the link to this page here should you wish to contribute:

 

https://www.crowdjustice.com/draft/9000/r/O95s8mYvTD-pd7GQngejaw/