With a recent history of “emergency” rent “freezes”, caps and controls and the prospect of further rent controls coming down the line with the proposed Housing (Scotland) Bill, the issue of how and when landlords can increase rent has become far more significant that it traditionally has been. It is also an issue that is seeing an increase in the number of rent disputes/appeals before the First-tier Tribunal. By way of context, unlike with Private Residential Tenancies (PRTs) where rent can only be increased by a landlord by employing the statutory procedure laid out in the Private Housing (Tenancies)(Scotland) Act 2016, landlords of older assured (and short-assured tenancies) can, where there is appropriate contractual provision, increase rent by simply following the mechanism laid out in the contract and therefore agreed with the tenant. That was the case throughout the “emergency” rules and even remains the case with the current rules around adjudication of rental disputes (our previous blog on those rules can be found here.
Where there is no such contractual provision, a landlord has to rely on the statutory procedure laid out under section 24 of the Housing (Scotland) Act 1988 (the 1988 Act). That being the case, older assured tenancies with such clauses are in a rather different position and landlords have been able to, and remain able to, increase rents by following the terms of the contract with little scope for challenge from tenants. However, the rules around rent increases in older assured tenancies are far from straightforward, as can be seen in a recent Upper Tribunal Decision.
What was the case about?
This was a case where tenants sought to appeal against a decision by the First-tier Tribunal (FtT) to make them pay rent arrears to their landlord. Where, despite a referral (under the emergency provisions as they were) to a rent officer about a contractual increase intimated by their landlord. The rules, as they were, meant rent officers would determine what the maximum rent would be under the “untested assumption” that the tenancy fell within the rent cap controls in place at that time (even if that was not actually the case). Notwithstanding that decision, the FtT went on to determine that the tenancy was exempt from the rent cap and that the tenants were due to pay the difference to the landlords. It was that decision that the tenants sought to appeal. They also raised a secondary point about whether the rent review clause was “fair” in the context of the section 71 of Consumer Rights Act 2015 claiming that the FtT had a “proactive duty” to determine whether a clause was fair even if it was not an issue that was raised by either party. In consumer contracts, unfair terms are not binding on consumers.
What did the Upper Tribunal Decide?
Summarising, the Upper Tribunal decided that the FtT was correct when it decided that the tenancy was exempt from the rent cap controls that were in place at that time. To explain, in terms of section 24(5)(b) of the 1988 Act, where there is a contractual rent review clause and the contractual tenancy has not been terminated, a landlord does not have to rely on the statutory rent review procedure and crucially, there was no import of the “emergency” rent cap controls to the operation of such clauses and no ability to refer such increases to adjudication.
Are there any exceptions to that?
As mentioned already, the rules are complicated, but this may not be the case where the contractual tenancy has been terminated and a tenant has what is called a “statutory assured tenancy”. Where that is the case, in terms of section 24(5)(a) only rent review clauses that contain a rent increase mechanism which relies on or incorporates factors that are not wholly within the control of the landlord, and which can be readily understood by the tenants will be excluded (for example by way of reference to RPI). If not and where the landlord can increase rent without any restriction on amount or times or formulae, they will not.
What about the “fairness” question?
The Upper Tribunal took the view that any “proactive duty” that may be upon the FtT to consider whether a clause was fair was “only triggered if the court decides that it has sufficient legal and factual material to make that assessment”. That included whether or not the FtT were even dealing with a “consumer contract”. As neither party had put this as an issue before the FtT, the Upper Tribunal took the view that no such duty arose in the circumstances and that the FtT “…could not have determined the question of fairness of its own volition…”.
Summary
Whilst the law has changed significantly on 1 April 2024 and new adjudication rules are in place, section 24 still regulates rent increases for assured tenancies and that includes the distinction on how they may work depending on whether the contractual tenancy is still in place or not. As the Upper Tribunal Judge said, despite the change in law, the decision may therefore still be of “contemporary relevance”. That of course may only be the case in so far as there are still assured (including short assured) tenancies in existence. As mentioned in our previous blog on the proposed rent controls in the Housing (Scotland) Bill (found here) currently going through the Scottish Parliament, one of the provisions is for further regulations which, if enacted, would convert all existing assured (including short-assured) tenancies to PRTs from a specified date anyway.
If you require any further information or advice, please contact us or watch our blogs for further updates.
