From 1st August 2012 Registered Social Landlords raising a rent arrears court action will have to confirm that they have complied with pre-action requirements before the Court will warrant the Summons.
This can be averred in the Statement of Claim in the Summons. Section 155 of the 2010 Act prohibits landlords from serving a Notice of Proceedings unless the landlord has complied with the statutory pre-action requirements. If the landlord is seeking repossession on more than one ground and one of these grounds is rent arrears then landlords must comply with the pre-action requirements. Furthermore, for decrees granted after 1 August 2012, the tenancy will only be terminated if the landlord recovers possession within 6 months of obtaining the decree. The Scottish Secure Tenancies (Proceedings for Possession)(Pre-Action Requirements) Order 2012 (the PAR order) outlines the pre-action requirements in more detail. In our view most RSL's will already be taking the steps set out in the PAR order.
Requirement to provide clear information about the tenancy agreement and outstanding financial obligations
The landlord must provide the tenant with clear information about the terms of the tenancy agreement and any outstanding rent or other outstanding financial obligation of the tenancy. In giving information to tenants, landlords must give a description of the rent and other financial obligations under the tenancy agreement, and information about the amount due to the landlord under the tenancy agreement. The amount due must be broken down to show the total amount of outstanding rent and other outstanding financial obligations and a description of any charges which the landlord anticipates will be incurred if the arrears or other financial obligations are not paid. “Charges” are any future charge arising from arrears of rent or other outstanding financial obligation and any indication of legal expenses that tenants may incur from such obligations. At this stage landlords will not know the Court’s assessment of expenses and these would depend on how any action proceeds. Landlords may choose to give tenants illustrative information about the costs that tenants have had to pay in similar cases. “Other financial obligation” means other financial obligations apart from rent for example service charges or payments towards insurance.
Requirement to make reasonable efforts to provide tenants with advice and assistance on eligibility for housing benefit and other types of financial assistance
The landlord must make “reasonable efforts” to provide the tenant with advice and assistance on the tenant’s eligibility to receive housing benefit and other types of financial assistance. Many landlords may already employ welfare officers within their organisations however they are now legally required to provide the tenant with information about where they can obtain assistance for managing their debts. This requirement will be satisfied by providing the tenant with details of persons or bodies who will be able to provide such advice and assistance.
There may be occasions when landlords make every effort but tenants fail or refuse to respond. In this case landlords should record brief details and dates of the help offered and the lack of engagement on the part of the tenant. The pre-action requirements require landlords to show the efforts that have been made.
The method by which advice should be given is not clearly set out by the legislation and the Scottish Government guidance states that it could be through face to face contact, in writing, by e-mail or telephone or text message. The guidance also states that landlords should not rely on a single approach. A single, unsuccessful attempt to communicate with tenants is unlikely to be enough for landlords to show that they have made reasonable efforts to provide the tenant with help and advice.
As landlords are required to provide advice and assistance they must do more than simply provide the tenant with advice, they must also help them. The PAR order requires landlords to give tenants details of appropriate specialists. These include:
- In-house income maximisation officers, money advice specialists or welfare enefits officers;
- Citizens Advice Bureaux;
- Welfare Rights Organisations or
- Other local advice agencies.
Landlords should provide contact details for the organisation or individual, including their telephone number, e-mail address and website.
Where tenants indicate that they require further assistance in contacting appropriate specialists, the Scottish Government guidance suggests that landlords could go further and refer tenants to a relevant person or body. Landlords must get tenants’ consent in writing before making a referral. If tenants ask landlords for assistance with a housing benefit application landlords should do what they can to assist, for example, or helping tenants to fill in the necessary forms, helping tenants to gather the necessary evidence to support the application or referral to an appropriate specialist.
Requirement to provide information in relation to the management of debt
The landlord must provide the tenant with information about sources of advice in relation to the management of debt. This could, for example, include advice on household budgeting, maximising income, reducing debt and consolidating debts. Landlords should only give tenants details of free and independent sources of debt help and advice. Again, it will be for the tenant to decide whether to approach any person or body for help and who they consult, but in appropriate cases the landlord could go further and refer the tenant.
Requirement to make reasonable efforts to agree a reasonable repayment plan
The landlord must make “reasonable efforts” to agree with the tenant a reasonable plan for future payments to the landlord and payments towards the outstanding rent arrears and any other financial obligations of the tenancy. Article 4(1) of the PAR order states that in making reasonable efforts landlords must:
- Make prompt and reasonable efforts to contact the tenant to talk about the arrears so that a payment plan for future payments of rent and repayment of arrears and other financial obligations can be made.
- Encourage the tenant to give landlords all relevant information on their financial circumstances.
- Advise tenants to seek help from an appropriate debt advice agency where the tenant makes landlords aware they have other debts as well as those related to the tenancy.
- Provide the tenant with details of any plan proposed, set out in a way as to allow tenants to consider the proposal.
- Allow the tenant time to consider the proposed plan.
- Consider the affordability of any plan taking into account the tenant’s personal and financial circumstances where the landlord knows them; and
- Give the tenant a copy of any plan they have agreed with the landlord.
If the landlord rejects the payment plan proposed by the tenant the landlord must provide reasons for rejecting the plan in writing. Landlords have to encourage tenants to give them all relevant information on the tenants’ financial circumstances.
This involves landlords explaining to tenants the need for information, asking them to be open and honest about their financial circumstances and being clear about how they will use the information to draw up a plan that the tenant should be able to afford and keep up payments on. Where a financial statement has been drawn up by a Citizen’s Advice Bureau, money advice agency or similar organisation landlords should take this into account.
Where a payment plan would be affordable and sustainable for tenants but landlords do not consider it to be reasonable landlords may have to explain their reasons for this to the court.
It must be made clear to the tenants that the payment plan is based on:
- Future rent payments
- Repayment of total amount of arrears
- Where appropriate taking into account the amount of any housing benefit
- and/or arrears of housing benefit
Where claims for housing benefit and/or arrears of housing benefit have not been decided, the housing benefit is not enough, or where tenants are taking other steps to address the arrears, there are two options open to landlords around agreeing a reasonable repayment plan:
- Estimate the amount of housing benefit; arrears of housing benefit; or other sums that the tenants indicate they are due and that are likely to be paid. Take these estimated figures into account when determining the reasonable payment plan. The risk with this approach is that the estimated sums do not materialise and landlords and tenants have to renegotiate a reasonable repayment plan with increased payments for the tenant or a longer period until arrears have to be paid off.
- Ignore the tenant’s income from benefits or other sources that are not yet known and base the repayment plan on known income. Take additional income into account when the tenant uses the additional income to make payment towards arrears. This approach is likely to result in renegotiating a revised payment plan with lower payments for tenants, or a shorter period for repayment once the financial situation improves.
It is up to landlords to decide which approach should be taken given the circumstances of the case. Tenants must understand the payment plan they are agreeing, what has been included and the possibility of future revisions to the repayment plan.
Landlords and tenants should try to agree affordable sums for tenants to pay towards arrears, based upon tenants’ income and expenditure. If landlords and tenants cannot agree affordable sums for tenants, landlords should make all reasonable efforts to try to resolve the situation before serving a notice where all of the other pre-action requirements have been met. The previous guidance on “reasonable efforts” applies.
Requirement to not serve a notice
The landlord must not serve a Notice of Proceedings if an application for housing benefit has been made but not yet been determined or the tenant has taken other steps which in the opinion of the landlord is likely to result in the benefit being paid at a level allowing the tenant to pay, or reduce by an amount acceptable to the landlord, the outstanding rent and any other outstanding financial obligation of the tenancy or if the tenant is complying with the terms of the agreed payment plan.
Landlords must consider any claim for housing benefit. This will include:
- A new claim for housing benefit
- A claim for housing benefit after a change of circumstances
- An application that has been made but not yet decided
- An application for backdating of a new claim or change of circumstances
- An application for reconsideration of a decision; or
- An appeal.
Landlords must encourage tenants who have made a claim for housing benefit to give their written authority to allow the landlord to talk about their application with relevant housing benefit staff. This involves landlords explaining to tenants the need for information on their housing benefit claim, asking them for written authority and being clear that they will use this authority to try and get information on the likely outcome of their housing benefit claim. If written authority is given landlords must take all reasonable steps to confirm that a housing benefit application has been made, find out when a decision on the application is likely to be made, find out whether the tenant has given all the necessary evidence and verification to support the claim or is within the allowed period for giving such evidence or verification and find out the likely outcome of the housing benefit application.
Reasonable steps could include one or more of the following:
- Seeking advice from housing benefits officers;
- Receiving electronic transfer of information from housing benefit officers;
- Seeking advice from other benefits specialists/advisers;
- Using online housing benefit calculators.
Where tenants haven’t given all the necessary evidence and verification to support their application the Scottish Government has suggested landlords could do what they can to help tenants to progress their housing benefit application. This could include making tenants aware of the evidence or verification housing benefit staff need or helping tenants to gather the correct evidence or verification.
Requirement not to serve a notice where there is a pre-arranged payment plan
The landlord cannot serve a Notice of Proceedings where the tenant is complying with a pre-arranged agreement plan. In determining whether tenants are complying with the agreed payment plan landlords must: promptly take reasonable steps to establish the reason for any default or shortfall in respect of an agreed plan; consider whether the agreed plan continues to be affordable for tenants; review the agreed plan where landlords consider it is no longer reasonable; and allow tenants reasonable time to make repayments or enter into a new plan. Where there has been a change in circumstances impacting on the tenant’s ability to make repayment arrangements landlords should consider whether a change in payment level is needed. If the landlord considers that the payment level remains appropriate then landlords must give tenants a reasonable time to comply with the existing agreement.
Requirement for the landlord to encourage the tenant to contact their local authority
The landlord must encourage the tenant to contact the local authority. This requirement is an extension of the existing requirement under Section 11 of the Homelessness (Scotland) Act 2003, which places an obligation on a landlord to inform the Council of their intention to evict a tenant. Landlords should do this by issuing a letter to tenants which explains the potential benefits of contacting the local authority at an early stage.
The pre-action requirements are not a substitute to the reasonableness test in Section 16 of the 2001 Act, but they will be a significant factor used by the Court in determining whether or not it is reasonable to evict.
Notice of Proceedings
Once landlords have met all of the pre-action requirements they may serve a Notice of Proceedings on the tenant. The form of the Notice of Proceedings has changed and can be found in Schedule 2 of the Scottish Secure Tenancies (Proceedings for Possession)(Form of Notice) Regulations 2012.
Landlords must confirm to the Court that they have met the pre-action requirements. This can be averred in the Statement of Claim of the Summons. There is no requirement at this stage for landlords to supply evidence to the Court of their compliance with the pre-action requirements.
Enforcement/effect of decrees
Under Section 16(5) of the Housing (Scotland) Act 2001 the granting of decree has the effect of terminating the tenancy at that date and giving the landlord the right to recover possession of the property. There is no provision within the 2001 Act which states that decree must be enforced within a specified timeframe. Under Section 153 of the 2010 Act the tenancy will only be terminated if the landlord recovers possession within six months of decree being granted. The purpose of this change is to allow a final opportunity for tenants and landlords to agree a way to resolve the arrears and avoid eviction.
Where tenants lodge an appeal the six month period will begin on the date of the court order disposing of the appeal. If landlords evict tenants within the period the court specified then the tenancy ends. If landlords don’t evict tenants then the order ceases to have effect after the specified period. If rent arrears reoccur then landlords will have to meet the pre-action requirements before raising any future proceedings to repossess the property.
This newsletter has been issued by Lindsays on the basis of publicly available information, internally developed data and other sources. Whilst all reasonable care has been taken to ensure the facts stated and the opinions given are correct, Lindsays does not accept any responsibility for its content and advise that specific advice should be sought regarding the topics covered.
© Lindsays 2013