Base Rate Held and Updates for Landlords including the Cost of Living Act for Rental Properties

Welcome news for most home owners and buyers as the base rate finally holds after 14 consecutive increases. Not so good news for landlords as it was confirmed the Cost of Living Act has been extended for a further 6 months and rent controls could remain in force.

Base Rate Held

In welcome news for mortgage holders, after 14 consecutive increases, the Bank of England held the base rate of interest at 5.25% today. The decision followed an unexpected fall in inflation figures released yesterday.

COST OF LIVING (TENANT PROTECTION) (SCOTLAND) ACT 2022 (AMENDMENT OF EXPIRY DATE) REGULATIONS 2023

The Scottish Government has confirmed that the extension of the Cost of Living (Tenant Protection) (Scotland) Act Regulations to 31 March 2024 has been approved by MSPs. 83 MSPs voted in favour of the extension and just 27 voted against it. This is the final extension permitted under the legislation.

This means that from until the expiry of the Act on 31 March 2024:

Most in-tenancy private rent increases will continue to be capped at 3% for any 12-month period.
Alternatively, private landlords can apply for increases of up to 6% to help cover certain increases in costs in a specified time period where these costs can be evidenced.
Enforcement of evictions will continue to be paused for six months for most tenants, except in a number of specified circumstances.
Increased damages for unlawful evictions of up to 36 months’ worth of rent will continue to be applicable.

Rent controls after 31 March 2024

The minister for tenants’ rights, Patrick Harvie, along with his colleagues in government have indicated that some form of rent control will remain in force after the Cost of Living (Tenant Protection)(Scotland) Act 2022 (COLA) ends on 31 March 2024. The COLA legislation allows amendments to be made to the rent adjudication process and it is expected that this is the mechanism which will be used to control rent increases after 31 March 2024.

Prior to the COLA legislation tenants who received a rent increase notice could refer it for adjudication to the rent officer. The rent officer was then required to assess the open market rental value for the property and set the rent at that figure.

The COLA legislation allows for a change to the rent officer’s duties to require them to set the rent not in line with market rents but in line with some other mechanism, such as one linked to inflation. If this were introduced it would mean that landlords could issue a rent increase for any amount but their tenant could then have the increase reduced by application to the rent officer.

The government has indicated that an announcement will be made on this in the next few months.

Longer term the Scottish Government committed in its New Deal consultation in 2021 to “introducing an effective national system of rent controls, with an appropriate mechanism to allow local authorities to introduce local measures by the end of 2025”. While Scottish Association of Landlords is a member of a rent control stakeholder engagement group set up by the government, no clarity has yet been provided to the group on what form this new system of rent controls will take. The detail is expected to be set out in a consultation paper which is due to be published in the next few weeks.

Energy efficiency update

The UK government announced yesterday that it would scrap plans to require landlords to improve the energy efficiency of their properties. As energy policy is devolved this announcement does not apply to properties in Scotland. The Scottish Government is expected to publish a consultation later this year on a Heat in Buildings Bill. The bill is expected to set out requirements for property owners in all tenures to improve the energy efficiency of their properties and install heating systems which don’t emit CO2. We will provide a summary of the bill’s contents once the consultation is published.

If you have any property questions, please get in touch.