Competence challenge to rent cap legislation by landlord representatives refused by lord ordinary

Competence challenge to rent cap legislation by landlord representatives refused by lord ordinary

A challenge to the legislative competence of the Cost of Living (Tenant Protection) Scotland Act 2022 and its imposition of a rent cap and eviction moratorium on private residential tenancies has been refused by a Lord Ordinary in the Outer House of the Court of Session.

It was argued by the Scottish Association of Landlords, Propertymark Ltd, and Scottish Land Estates Ltd that the continued application of the Act to private residential tenancies was a disproportionate interference with their members’ rights under Article 1 Protocol 1 ECHR. An additional complaint was that removing the rent cap for social rented sector tenancies while leaving it operational in the private sector amounted to unjustified discrimination against private landlords.

The petition was considered by Lord Harrower. Lord Davidson of Glen Clova KC and T Young, advocate, appeared for the petitioners and Mure KC and Irvine, advocate, for the Scottish Ministers as respondents.

Rational connection

On 6 September 2022, the Scottish government announced its intention to introduce emergency legislation to protect tenants by freezing rents and imposing a moratorium on evictions until at least 31 March 2023. This was said to be in response to the cost of living crisis. The Act originally applied to all tenancies in Scotland, but the respondents later introduced regulations bringing about the expiry of the rent cap for Scottish secure tenancies and the suspension of the cap on student residential tenancies.

The respective memberships of the petitioners included landlords with fewer than five properties, property agents, and rural business owners in Scotland. The respondents maintained that the petitioners’ status as representatives entailed that they were unable to point to any factual circumstances of their own which might give rise to a finding of disproportionate interference with property rights. As a result, the petitioners were unable to satisfy the threshold test for an ab ante challenge to the legislative competence of the 2022 Act.

It was submitted for the petitioners that rent controls had repeatedly been found to interfere with A1P1 by the European Court of Human Rights, the case law of which demonstrated a general theme that deprivation of property without compensation would normally be disproportionate. The true objective of the Act was to respond to an increase in energy prices, and while the legislative aim of the Act was not manifestly unreasonable there was no rational connection between that objective and the measures adopted.

Counsel for the respondents submitted that anyone advancing an ab ante challenge required to show that the operation of the legislation would give rise to an unjustified interference with Convention rights in all or almost all cases, which the petitioners were unable to do. Neither measure imposed by the 2022 Act was absolute. Rent could still be increased between tenancies and properties repossessed on ordinary timescales by specified grounds, including a landlord’s financial circumstances. The different approaches taken to the private and social rented sectors reflected the differences between them while ensuring their tenants were substantially treated the same.

Bad faith challenge

In his decision, Lord Harrower observed: “The petitioners founded on the absence of formal consultation, and the fact that the Bill was introduced to and passed by the Scottish Parliament within a single week. This reduced the time available to the Scottish Parliament and correspondingly raised the appropriate intensity of review. However, in my view, the very fact that the legislature saw itself as responding to an emergency should be seen by the court as lowering the intensity of review, when viewed along with the legislature’s response to that situation, which may be described as both temporary and provisional.”

He continued: “Insofar as the petitioners’ case amounted to saying that the Scottish Parliament, under the guise of a supposed emergency situation, sought to impose upon landlords, without proper consultation, a lasting set of rent controls, then I consider that the respondents were well founded in describing this as a bad faith or ulterior purpose challenge to the legislation. In that event, the petitioners would have failed to meet the high standard of proof beyond reasonable doubt which is appropriate to challenges of that nature.”

Turning to the ECHR arguments, Lord Harrower said: “Having regard to the legislature’s discretionary area of judgment in socio-economic matters, this court has not been provided with any basis on which to judge that a less intrusive measure could have been used without unacceptably compromising achievement of the legislature’s objectives.”

He concluded: “As to whether a fair balance has been maintained between the rights of landlords and the interests of the community, I have already noted the broad parity of treatment of landlords in the two sectors, at least in cash terms. In addition, however, landlords in the private rented sector have the opportunity to seek an above-cap increase in respect of prescribed property costs. Taking each of the four stages of the proportionality assessment into consideration, I find it impossible to say that the Scottish Ministers’ assessment of proportionality was manifestly without reasonable foundation.”

Lord Harrower therefore refused to grant the orders craved in the petition.

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