Housing (Scotland) Act 2025

Housing (Scotland) Act 2025

2025 asp 13

Crown Application

Part 1 – Rent

Chapter 2 – Rent control areas: modifications of the 2016 Act

Setting and variation of rent

Section 23 - Setting and variation of rent

58. This section inserts new sections 17C and 17D into Part 4 of the 2016 Act and adjusts the Part heading to take account of this (see subsections (2) and (3)). It also inserts new Part 4A into the 2016 Act in consequence of Chapter 1 of Part 1 of the 2025 Act to provide for some new rent controls in any area that is designated as a rent control area under that Chapter (see subsection (4)).

59. New section 17C adjusts Part 4 of the 2016 Act so that the rent controls under that Part only apply to a PRT of a property that is not in a rent control area and to a PRT of a property in a rent control area if it is an “exempt property”.

60. New section 17D confers a regulation-making power on the Scottish Ministers to define what is an exempt property for the purpose of both Part 4 and new Part 4A of the 2016 Act. The power in new section 17D may define what is an exempt property with reference to the landlord or tenant of the property or the type of property. Consideration may, for example, be given to exempting a particular type of property or, a property in particular circumstances, where it might be disproportionate to impose the rent control restrictions that would otherwise apply. Regulations may not be made under this power unless consultation has been carried out with persons representative of landlords and tenants (see subsection (6)). A draft of the regulations must also be laid before, and approved by, the Scottish Parliament before they can be made (see section 77(3) of the 2016 Act, as modified by paragraph 7(6)(c)(i) of the schedule of the 2025 Act).

61. New Part 4A of the 2016 Act comprises sections 43A to 43W. The following paragraphs explain the effect of these new sections of the 2016 Act.

62. New section 43A provides that Part 4A of the 2016 Act applies to PRTs of properties in a rent control area (that are not exempt from the rent control area restrictions by virtue of regulations under new section 17D of the 2016 Act) and defines each such tenancy as a “current tenancy”.

63. New sections 43B to 43F provide definitions for various expressions used in the new Part 4A that are relevant to the provisions restricting the initial setting of rent of PRTs of properties in a rent control area (that are not exempt properties) and other increases in rent of those properties. They also include regulation-making powers to adjust some aspects of these definitions. In particular, section 43D provides that, in new Part 4A of the 2016 Act, references to the “permitted rate” mean the lower of (a) the percentage increase or decrease (rounded to the nearest 0.1%) in the consumer prices index (calculated by reference to the latest index and the index that was published for the month which was 12 months before the month to which the latest index relates), plus one percentage point, and (b) 6%. In short, it means the lower of the CPI% plus 1%, and 6%.

64. New section 43G limits the initial rent for a current tenancy of a property in a rent control area if that property was “previously let”. A current tenancy was previously let if it is the same or substantially the same as the property let under a PRT or an assured tenancy that ended no more than 12 months before the current tenancy. But a property is not “previously let” if it is excluded because it was purchased by the landlord with vacant possession and the current tenancy is the first PRT of the property granted since the purchase. Subsection (2) of the new section provides that, if there was a “relevant rent increase” during the year before the start of the current tenancy, the initial rent may not be more than the final rent under the previous PRT or assured tenancy of the same or substantially the same property (see also subsection (3)).

65. In new Part 4A of the 2016 Act, a “relevant rent increase” is (a) a rent increase during a previous PRT or assured tenancy of the same or substantially the same property, or (b) a setting of the initial rent under any such previous tenancy (“tenancy A”) that is more than the final rent under an immediately preceding tenancy of that kind that ended no more than 12 months before tenancy A (see section 43C of this new Part). But the setting of any such initial rent is not a “relevant rent increase” if tenancy A is the first PRT of the property let under that tenancy following the purchase of that property by the landlord with vacant possession. If there was no such relevant rent increase during the year before the start of the current tenancy, the rent at the start of the current tenancy may be an amount that is not more than the final rent under the preceding relevant tenancy as increased by the “permitted rate” (within the meaning of section 43D of the new Part 4A).

66. New section 43H provides that the rent payable under a current tenancy may be increased only in accordance with Chapter 2 of new Part 4A of the 2016 Act.

67. New section 43I imposes a restriction on the frequency of rent increases under a PRT of a property in a rent control area. If the let property was “previously let”, after the initial rent has been set, the rent may only be increased if the “previous rent increase” (within the meaning of section 43F) was more than a year ago. If the let property was not previously let, the rent may not be increased during the first year of the tenancy except in prescribed circumstances. Thereafter, in both cases, the rent may not be increased more than once in any subsequent 12-month period.

68. New sections 43J and 43K are equivalent to section 20 (no premiums, advance payments, etc.) and section 21 (restriction on diligence) of the 2016 Act in relation to PRTs of properties that are not in rent control areas, and properties that are in a rent control area but are exempt properties (within the meaning given by section 17D(1) of the 2016 Act, as inserted by section 23(3) of the 2025 Act). New section 43J provides that sections 82, 83 and 86 to 90 of the 1984 Act apply in relation to PRTs as they apply in relation to tenancies of the kind to which those sections of the 1984 Act apply. These sections of the 1984 Act impose restrictions on, among other things, the payment of any fine, sum or pecuniary consideration, other than rent, and includes any service or administrative fee or charge. New section 43J therefore ensures that sections 82, 83 and 86 to 90 of the 1984 Act apply to PRTs in the same way as before, even if the let property is situated in a rent control area. New section 43K ensures that restrictions that apply to PRTs in relation to the recovery of rent under section 21 of the 2016 Act will also apply to PRTs in a rent control area.

69. New sections 43L to 43V comprise Chapter 2 of new Part 4A. These new sections make provision for rent variation of let property in a rent control area (that is not an exempt property) and rent variation instigated by the landlord’s notice. The new sections are explained below.

70. New section 43L provides that a landlord under a PRT may increase the rent payable under the tenancy by giving the tenant a rent-increase notice, but the landlord may not increase the rent by more than the permitted rate. The rent-increase notice given by the landlord to the tenant must specify: the rent that will be payable once the increase takes effect, the day when the increase is to take effect, and the reasons for the rent payable under the tenancy being increased (see subsection (3)(a)). The notice must also comply with any other requirements that may be set out by the Scottish Ministers in regulations (see subsection (3)(b)). The Scottish Ministers may bring forward regulations that specify the information to be included in the rent-increase notice, the form the notice should take and the way in which the notice must be served on the tenant (see section 77(2) of the 2016 Act, as amended by paragraph 7(6)(b)(i) of the schedule of the 2025 Act). The rent increase will take effect on the effective date unless before that date the landlord withdraws the notice, or the tenant makes a timeous referral to a rent officer or the Tribunal for rent verification (see subsection (4)). The “effective date” is the later of either the day specified in the rent-increase notice or the day after the day on which the minimum notice period ends (see subsection (5)). The minimum notice period is 3 months or whatever longer period has been agreed between the landlord and tenant (see subsection (6)). This period begins on the day the tenant receives the rent-increase notice. Section 26 of the Interpretation and Legislative Reform (Scotland) Act 2010 sets out (rebuttable) presumptions as to when a document that has been served by post or electronically is deemed to be received.

71. New section 43M enables the landlord and tenant, by agreement, to change the proposed new rent and to change the date specified in the notice (although the date on which the notice takes effect remains subject to the minimum notice period due to the operation of new section 43L(5), so an agreed change could not dispense with the minimum 3 months’ notice) (see subsection (2)). This option does not apply if the permitted rate is 0% (see subsection (1)). Furthermore, in other cases, no modification can be agreed which would increase the rent payable under the tenancy by more than the permitted rate (see subsection (3)). If a tenant and landlord initially agree to change what is in the rent-increase notice but the tenant reconsiders and subsequently refers the notice for verification within the permitted time period, the referral to the rent officer will proceed as if no such agreement to modify the notice had been made (see subsection (4)). (This will be of relevance when the order-maker requires to know the date on which the increase would have taken effect had a referral not been made.)

72. New section 43N provides that a tenant can refer a case to a rent officer for verification if the tenant considers that the proposed increase in the rent payable under the tenancy is more than the permitted rate (see subsection (2)). But the tenant must first give notice to the landlord of the tenant’s views within 30 days of the tenant receiving the rent-increase notice (see subsection (1)). An application to a rent officer must be made within 42 days of the landlord receiving notice of the tenant’s views, be in the prescribed form and accompanied by the prescribed fee (if any) (see subsection (3)(a), (b) and (d)). The tenant must also notify the landlord in the prescribed manner that the case has been submitted for adjudication (see subsection (3)(c)). The Scottish Ministers may set out in regulations the form to be used, the fee, and how the landlord is to be notified.

73. New section 43O gives a rent officer the power to decide, on receipt of a rent verification referral, whether the proposed rent set out in a rent-increase notice would be an increase of more than the permitted rate. If the rent officer decides that the proposed rent increase for the tenancy is no more than the permitted rate, the rent officer must make an order determining that the rent payable under the tenancy is the rent as specified in the rent-increase notice given by the landlord (see subsection (2)). If the rent officer decides that the proposed rent increase for the tenancy is more than the permitted rate, the rent officer must determine that the amount of the rent payable under the tenancy is the current rent as increased by the permitted rate. Or, if the permitted rate is 0%, the rent officer must order that the rent-increase notice is of no effect (see subsection (3)(a)).

74. New section 43P enables a rent officer to correct an error in an order issued under section 43O(2) or (3) by issuing a new order.

75. New section 43Q enables a landlord or a tenant under a PRT to request a review of an order made by a rent officer under section 43O(2) or (3).

76. New section 43R provides that a new rent officer considering a review is to make a decision on the same basis as the original rent officer (i.e. to decide whether the proposed rent set out in a rent-increase notice would be an increase of more than the permitted rate) and has the same order-making powers.

77. New section 43S enables a tenant to apply to the Tribunal for a determination of whether a relevant rent increase took place less than 12 months previously (meaning that, in effect, the date on which the proposed rent increase would take effect under the rent-increase notice is too soon), or that the rent payable at the start of the tenancy was not determined in accordance with section 43G(2) or (3) (meaning that, in effect, the “base rent” on which the proposed rent increase is based has been incorrectly determined). But the tenant must first give notice to the landlord of the tenant’s views within 30 days of the tenant receiving the rent-increase notice (see subsection (2)). An application to the Tribunal must be made within 42 days of the landlord receiving notice of the tenant’s views and must be intimated to the landlord in the prescribed manner (see subsection (4)).

78. New section 43T sets out the Tribunal’s decision-making powers.

79. If the Tribunal decides, in effect, that the date on which the proposed rent increase is to take effect is too soon, it must make an order providing that the rent-increase notice is of no effect (see subsection (2)(a)). Or, if the Tribunal decides that the proposed date of increase is not too soon, the Tribunal must decide that the rent is the lower of (a) the new rent as specified in the rent-increase notice and (b) the existing rent as increased by the permitted rate (see subsection (2)(b)).

80. If the Tribunal decides that the rent payable at the start of a tenancy (the “base rent”), which is proposed to be increased by the rent-increase notice, has not been set in accordance with section 43G, the Tribunal must make an order stating that, from the effective date, the rent payable under the tenancy is the rent determined by it (see subsection (4)(a)). Section 43G provides that, where the let property was previously let, this base rent is either to be no more than the amount of rent payable at the end of the previous tenancy, or if 12 or more months have passed since the last “relevant rent increase”, that amount as increased by the permitted rate. The rent determined by the Tribunal cannot be more than what the base rent should have been set at (in accordance with section 43G) as increased by the permitted rate (see subsection (5)).

81. But if the Tribunal decides that the base rent was determined in accordance with section 43G, the Tribunal must decide that the rent is the lower of (a) the new rent as specified in the rent-increase notice and (b) the existing rent as increased by the permitted rate (see subsection (4)(b)).

82. New section 43U deals with what is effectively an underpayment of rent which arises where the effective date of the rent officer’s or the Tribunal’s decision is later than the date that the rent increase had originally been due to take effect. Throughout the process of making a referral (or application) to a rent officer (or the Tribunal), the tenant will continue to be liable to pay the existing rent as usual. Once the new rent has been determined, if the rent is increased as a result of the application, the tenant must pay the landlord the difference between the old rent over the relevant period and the new rent over the relevant period (see subsection (2)). The relevant period is the period between the original rent increase date and the date on which the new rent takes effect. The tenant will have 28 days within which to pay the landlord the full amount due under this section. If the tenant fails to pay the landlord within this timescale, on day 29 the sum is treated as rent arrears for the purpose of that eviction ground and as having been rent arrears from the date that the final rent determination was made.

83. New section 43V deals with the withdrawal of an application etc. to a rent officer or the Tribunal in relation to: a referral to the rent officer under section 43N(2) by the tenant, a request for review by one party only under section 43Q(1), and an application to the Tribunal under section 43S(1) by the tenant. The rent officer or the Tribunal to whom the application etc. was originally made must consider the application etc. and make an order under section 43O(2) or (3), 43R(2) or (3), or 43T(2)(b) or (4)(a) or (b) (see subsection (2)). But the order is restricted to deciding that the rent payable under the tenancy is the lower of (a) the new rent as specified in the rent-increase notice and (b) the existing rent as increased by the permitted rate.

84. New section 43W confers a regulation-making power on the Scottish Ministers make provision for or in connection with the conferral of powers for the Tribunal to make an order requiring certain landlords to pay a financial penalty or a compensation payment to the tenant (up to a maximum amount of £1,000). The landlords are those against whom an order of a rent officer has been made under section 43O(3) or 43R(3), or against whom an order of the Tribunal has been made under section 43T(2)(a) or (4)(a). Regulations cannot be made under this power unless the Scottish Ministers have consulted persons who appear to represent the interests of tenants and landlords, and a draft of them has been laid before, and approved by, the Scottish Parliament.