When the Home Owner and Debtor Protection (Scotland) Act 2010 was introduced in Scotland, it was introduced with a certain amount of urgency amid fears the credit crunch would result in rising numbers of repossessions. Although that did not materialise, the plight of tenants facing evictions was only belatedly considered. At the time, social landlords were twice more likely to get a decree against a tenant than a creditor was against a home owner, and of the 3,573 evictions in Scotland in 2007-08 by social landlords, almost all were for rent arrears.
The Housing (Scotland) Act 2010 does for Scottish Secure Tenants what the Home Owner and Debtor Protection (Scotland) Act 2010 does for home owners: it reduces the likelihood of people losing their homes because of rent arrears, by imposing duties on landlords in the form of Pre-action Requirements (PARs); and amending the rules relating to when a landlord can use a decree to evict a tenant and terminate the tenancy.
The PARs are similar to those for home owners, in that they outline the minimum steps that must be taken before legal action to recover a property can commence.
Legislative Framework and Commencement
The new requirements are introduced by section 155 of the Housing (Scotland) Act 2010 (The 2010 Act) which amends section 14 of the Housing (Scotland) Act 2001 (The 2001 Act).
There are also a number of secondary pieces of legislation which implement the new provisions.
In addition to this, S153 of the 2010 Act amends S16 of the 2001 Act, altering when a tenancy is terminated after a court has granted a court order for possession on the grounds the tenant had rent arrears.
The new provisions came into force on the 1st of August 2012 and will not apply in cases where notices have been served prior to the commencement date.
The five pieces of secondary legislation are:
1. Scottish Secure Tenancies (Proceedings for Possession) (Pre-Action Requirements) Order 2012: (“the PAR Order”) this expands on the pre-action requirements
2. Scottish Secure Tenancies (Proceedings for Possession) (Confirmation of Compliance with Pre-Action Requirements) Regulations 2012: (“the Confirmation Regulations”) this lays down the practice which a landlord must use to confirm to the court that the pre-action requirements have been complied with
3. Scottish Secure Tenancies (Proceedings for Possession) (Form of Notice) Regulations 2012: (“the Notice Regulations”) this replaces the existing Notice of Proceedings form with 2 new forms – for cases where grounds do and do not include rent arrears
4. Scottish Secure Tenancies (Repossession Orders) (Maximum Period) Order 2012: (“the Period Order”)
5. Housing (Scotland) Act 2010 (Commencement No.7 and Transitional Provision) Order 2012: this sets the commencement date as the 1st August 2012
The Scottish Government have also issued guidance which landlords must have regard to when complying with the Pre-action Requirements (The Guidance)[i].
Scottish Secure Tenancies: Rent Arrears and Pre Action Requirements
The new PARs do not fundamentally alter Scottish Secure Tenancies in that tenants still have an obligation to pay their rent when due and where they do not, landlords do have the right to commence legal action to recover possession of the property.
However, the basic principle that underpins the new set of protections is outlined in the Scottish Government Guidance as the “landlords and tenants must do all that they can to resolve the arrears before landlords take action to evict.”[ii]
Essentially there are eight requirements landlords must satisfy before they serve a notice on a tenant or qualifying occupier indicating that they intend to recover possession of a property. These requirements, however, only need to be satisfied when the grounds for recovery are rent arrears; where the grounds do not relate to rent arrears the landlord does not need to satisfy the PARs. Where there are multiple grounds for recovering possession and one of these is rent arrears then the PARs must be satisfied[iii].
The eight PARs are[iv] to:
- Give clear information about the tenancy agreement and the unpaid rent or other financial obligations;
- Make reasonable efforts to give help and advice on eligibility for housing benefit and other types of financial assistance;
- Give information about sources of help and advice with the management of debt;
- Make reasonable efforts to agree with the tenant a reasonable plan for future payments;
- Consider the likely result of any application for housing benefit that has not yet been decided;
- Consider other steps the tenant is taking which are likely to result in payment within a reasonable time;
- Consider whether the tenant is complying with the terms of an agreed plan for future payments; and
- Encourage the tenant to contact their local authority (where the local authority is not the landlord).
The first requirement a landlord must satisfy is to show they have provided the tenant and any qualifying occupiers[v] with clear information about the tenancy agreement and the unpaid rent or other financial obligations.
This requirement is contained in the new S14A (2) of the 2001 Act[vi]. The requirement is further expanded upon by Regulation 2 of The PAR Order and paragraphs 20-28 of The Guidance.
Landlords should where possible provide tenants with a breakdown of the outstanding rent and other financial obligations still owing, which may include service charges and insurances. The landlord should also provide the tenants with a breakdown of any charges or expenses that may be incurred should the landlord have to take recovery action. These should be illustrative of the types of charges and expenses, including legal expenses that other tenants may have incurred in the past, where such information is available.
Where tenants are known to have vision problems or learning difficulties or English is not their first language, Landlords should take reasonable steps to ensure the tenant understands the information that is being provided. This may mean not providing it in standard format, but having it translated or printed in large fonts or offering to have someone read and explain it to the tenant.
Reasonable Efforts and Advice and Assistance
This requirement obliges landlords to make reasonable efforts to contact tenants and give them assistance on their eligibility to obtain housing benefit and other types of financial assistance, such as other benefits and grants. Presumably, this will also include Discretionary Housing Payments.
They should also provide tenants with information on other agencies which can assist them and help them with the management of debt. Examples of such agencies are provided in The Guidance and include Citizen Advice Bureaux and in-house money advice services. The Guidance also suggests that where a tenant indicates they are willing to be referred onto such an agency, the landlord should consider referring them on by passing on the tenant’s information, providing the tenant gives written consent. Where the landlord wishes feedback on the outcome of the referral, the Guidance states good practice is to obtain the tenant’s written consent.
Where a tenant requests it, the landlord should consider assisting them in making a benefit or other financial assistance application.
What constitutes reasonable is not defined in the new S14A (3) of the 2001 Act or in the PAR Order, but is expanded upon in paragraphs 31-38 of The Guidance. The Guidance makes the point what constitutes reasonable ultimately will be for the court to decide, but emphasises all contacts with the tenant whilst attempting to resolve the arrears should be on the basis of the guidance. It also stresses where tenants do not engage or respond, landlords should keep a record of all attempts to contact the tenant.
The Guidance makes it clear landlords should not restrict themselves to only one method of communication and should consider various methods, such as letters, email and face to face meetings. Where the tenant is vulnerable or has health problems, caution should be exercised, especially where tenants have mental health or legal capacity issues. Where tenants have support workers and are happy for them to be contacted, landlords should include them and those with powers to act on behalf of the tenant into communications.
Reasonable Efforts to Agree a Plan
Section 14A (5) requires a landlord to make reasonable efforts with a tenant to agree a plan for dealing with their rent arrears.
The PAR Order defines this as making prompt and reasonable attempts to contact the tenant to discuss the arrears with a view to agreeing a plan; encouraging the tenant to provide the landlord with all relevant information on the their financial circumstances and encouraging them to seek appropriate debt advice when they indicate they have other debts.
Landlords must also provide tenants with copies of any proposed plan and in a format that allows it to be considered. They must give the tenant time to consider it and they must consider its affordability taking into account the client’s financial circumstances. Where the landlord rejects any proposal that is made by the tenant they must state their reasons in writing.
In determining whether a plan is reasonable, landlords should consider all information such as an application for housing benefit. Where this has been made, the landlord may enter into a repayment plan, based on what it is estimated the tenant will receive if the application succeeds; or on the basis of the application not succeeding. Either way, in such cases it should be explained to the tenant that a variation of the agreement may be required, depending on the outcome of the application.
Application for Housing Benefit
Section 14a (6) of the 2001 Act states that a landlord must not serve a notice on the tenant if an application for housing benefit has been made and, in the opinion of the landlord, is likely to result in the benefit being paid at a level likely to pay or reduce the rent or other financial obligation outstanding by an amount acceptable to the landlord.
In making such a decision Art 5 of the PAR Order states the landlord should encourage the tenant to give them permission to liaise with the relevant housing benefit staff to confirm an application has been made; establish when a determination of the application is likely; and whether all the evidence and verification necessary to support the application has been provided. Where the tenant does not provide such permission, the landlord should still take whatever steps they can to determine the likely outcome of the application and consider this when arriving at an opinion on whether the application will succeed and whether the amount payable will be acceptable.
Where the landlord cannot make a decision on whether the application will be successful, they must still refrain from serving a notice where the tenant is taking other steps that could result in the repayment of the arrears and other financial obligations within a reasonable time. In deciding whether other reasonable steps are being taken the landlord should consider all information, including applications for other benefits, grants or the possibility of lump sum payments that could be made in the future.
A notice should also not be served if the debtor is complying with an agreed repayment plan under S14A (5). In deciding if a tenant is complying with a repayment plan, Art 7 of the PAR Order and paragraph 76 of The Guidance recommends landlords must promptly try and ascertain the reasons for any missed payments; consider the continuing affordability of the plan, particular where there has been a change in circumstances; and review the plan where necessary. They should also consider letting the tenant catch up with missed payments within the term of the original plan and consider whether a new plan should be entered into under s14a (5).
Contact with Local Authority
Tenants should also be encouraged to contact their local authority, where the landlord is not the local authority. This is to encourage them to explore the possibility of other housing options should they become homeless.
Serving a Notice of Intention to Recover Possession
S14(2A) of the 2001 Act states that the landlord must not serve a notice of intention to recover possession of a property, where one on the grounds relied upon is rent arrears, unless the Pre-action Requirements contained in section 14A are complied with.
Where a notice is served after the 1ST of August 2012 and it relates to rent arrears, it must now specify what steps the landlord has taken to satisfy the Pre-action Requirements.
There are two new forms of notice which are contained in Schedule 2 of The Scottish Secure Tenancies (Proceedings for Possession) (Form of Notice) Regulations 2012. One is for actions involving rent arrears; the other is for those that are not.
Sequestration, Rent Arrears and the Pre-action Requirement
The Guidance also deals with the issue of rent arrears and sequestration and indicates where a tenant is sequestrated prior to a notice being served that the landlord should consider whether to continue to proceed with recovery action.
It indicates that rent arrears up to the date of sequestration will be included in the bankruptcy, but attempting to evict the client may be viewed by other creditors as an attempt to gain unfair preference and a sheriff may not consider eviction in such circumstances as reasonable.
It recommends that landlords should only pursue the arrears through the bankruptcy, as normally it is not recoverable by any other means. For arrears accumulated after the date of sequestration landlords can pursue these by normal means, but in such cases, the landlord would need to show they have satisfied the PARs for those post sequestration debts.
Tenant Protection: Repossession Orders
Section 153 of the 2010 Act also amends S16 of the 2001 Act, which relates to the power of the courts in recovery proceedings for Scottish Secure Tenants.
Previously under section 16 (5) when a court granted an order for recovery, they had to specify a date when the possession would take place. This had two effects: first the tenancy would be terminated on that date; and second it gave the landlord the right to take possession of the property.
The created the problem that even when evictions didn’t proceed because agreements were reached, tenants still had to enter into new tenancy agreements and a “technical eviction” occurred. This will no longer be necessary as S153 introduces a new S16 (5A) (b) which means where the recovery action relates to rent arrears the date included in the court order will no longer be the date the tenancy terminates. Instead the Scottish Secure Tenancy will only terminate on actual eviction.
A new section 16 (5A) (c) also requires the court when making an order to specify a period in which the landlord has a right to recovery possession of the property, which will be six months from the date the court order is extracted (normally two weeks after it is granted)[vii].
Where an appeal is lodged after the decree is extracted, the prescribed period will be six months from the date of the order disposing of the appeal.
This will bring to an end the less reputable practices of some landlords of hanging decrees of eviction over tenants heads like “swords of Damocles” even after agreements have been reached to repay arrears.
When a notice has been served and the Landlord proceeds to raising an action for possession of the property, Regulation 2 of the Confirmation Regulations states that the writ that is submitted for warranting by the court must contain an averment that the PARs have been complied with.
Where this is in dispute and evidence can be led to show this fact, the action may be defended on the basis there has not been compliance and may be dismissed by the courts, similar to the way the courts deal with PARs for home owners.
In conclusion, although it is unlikely many of Social Landlords will struggle to comply with the new PARs, especially as they have had more than 18 months to prepare, they represent a progressive step forward in helping cut the numbers of evictions in Scotland for rent arrears. Arguably, they may already have with evictions by social landlords in 2010/11 dropping to 1,061 from the 3,573 in 2007/08.
It will be interesting to see how Scottish Courts and Landlords deal with the new requirements. Some housing lawyers have pointed out another effect of the PARs will be to make it easier for landlords to secure a decree once a case goes to court, providing the landlord can evidence compliance, as it will be strong proof of reasonability. This may be the case, but increase compliance with PARs will hopefully ensure fewer cases get to court to begin with.
By placing more emphasis on preventative action, the Scottish Parliament has clearly sent a message that eviction, like repossession is a remedy of last resort.
[i] Housing (Scotland) Act 2001 and 2010, Guidance for Social Landlords on Pre-Action Requirements and Seeking Repossession of Social Housing June 2012 (The Guidance) (http://www.scotland.gov.uk/Resource/0039/00395195.pdf)
[ii] Para 14 The Guidance
[iii] S14(2A) (a) Housing (Scotland) Act 2001 as amended by s155(a) Housing (Scotland) Act 2010
[iv] Para 5, The Guidance; S14A Housing (Scotland) Act 2001 as amended by S155 of the Housing (Scotland) Act 2010
[v] S14(6) of the Housing (Scotland) Act 2001 define Qualifying Occupiers as anyone who has the property as a principal residence and is over 16 years old and part of the tenants family, or anyone who has been given permission to sublet or assign either the full property or part or it or someone the tenant with permission has taken in as a lodger.
[vi] As amended by S155 of The 2010 Act
[vii] Reg 2 Scottish Secure Tenancies (Repossession Orders) (Maximum Period) Order 2012