Social sector rent arrears - pre-action requirements

The Housing (Scotland) Act 2010 introduces pre-action requirements that all social landlords must comply with where they are seeking possession of a social tenant's property because of rent arrears, along with any other ground. This requirement came into force on 1 August 2012. [1]

The aim of the pre-action requirements is to protect tenants in the following ways:

• early intervention - to ensure that social landlords engage with tenants who are in rent arrears as early as possible

• eviction as a last resort - ensuring that eviction is always a last resort in rent arrears cases

• alternatives to eviction - to make sure that all social landlords consider alternatives to eviction in rent arrears cases

• consistency - to ensure that all social landlords across Scotland are consistent in their approach to handling cases which involve rent arrears. [2]

Overall, the aim is that both landlords and tenants do everything they can to avoid an eviction action. [3]

The requirement to comply with the pre-action requirements only applies when a notice of proceedings is served on a tenant, or qualifying occupier, on or after 1 August 2012. Landlords who have served a notice of proceedings before 1 August 2012, which is still in force when the case goes to court, do not need to carry out the pre-action requirements. [4]

Social landlords should not go to court to pursue a possession action for rent arrears if they have not completed each pre-action requirement.

Social landlords must:

• give tenants clear information - about the terms of the tenancy agreement and the rent, or any other financial obligation they owe the landlord

• offer tenants help and advice - make reasonable efforts to give tenants help and advice on their eligibility for housing benefit or other forms of financial assistance

• give information on seeking help with debt management - tenants should be given information on where to get help with managing their debts

• try to agree a payment plan - landlords should make reasonable efforts to agree a payment plan with the tenant which includes both the future rent and the arrears

• not pursue a possession action before considering:

  - housing benefit applications and what the likely result of this will be

  - the tenant’s actions steps that tenants are taking which are likely to result in them paying off the arrears in a reasonable time

  - whether tenants are sticking to any payment plan assess whether tenants are adhering to the terms of any agreed repayment plan

• encourage tenants to contact their local authority - tenants should be made aware of the benefits of contacting their local authority, where the landlord is not a local authority.

In complying with the pre-action requirements landlords must also have regard to the Scottish Government’s guidance on pre-action requirements. [5]

Landlords must give the tenant clear information about the terms of the tenancy agreement, e.g. when the tenant entered into the agreement, how much the rent is and when it should be paid. They should also clearly state the outstanding rent and any other financial obligation related to the tenancy. [6] This information must be broken down to show the total rent owed, along with any other money that the tenant is liable to pay. Landlords must also give the tenant information on any other charges that may be incurred if these amounts are not paid, [7] e.g. legal expenses where possible. [8] This means that tenants should be fully aware of all the financial implications of non-payment of rent including any court action which may be raised against them.

Landlords should provide this information as soon as they consider reasonable after the tenant has fallen behind with their rent. The information should be clear and easy to understand. Where landlords are aware that a tenant has particular needs, e.g. learning difficulties, they should take these needs into account to ensure that the tenant understands their financial situation. [9] 

Landlords are required to make reasonable efforts to give tenants information relating to their eligibility for housing benefit and any other financial assistance that they may be eligible for. [10] Landlords should contact tenants to check whether they’re eligible for these benefits, telling them who to contact to make an application. If a tenant requests that a landlord help them with their housing benefit application, landlords should offer them reasonable assistance in doing so. [11]

There’s no definition of ‘reasonable efforts’ in the legislation. What is considered reasonable will depend on the circumstances of each case. In case this is ever challenged, landlords should keep a record of all efforts to give tenants assistance. This should include the date, time and method they used. Particularly when a tenant  refuses assistance, or the landlord cannot get in contact with them. [12] One unsuccessful attempt to get in touch with a tenant is unlikely to be enough to satisfy this pre-action requirement. [13]

The method of communication is also up to the landlord. It could include face-to-face advice, telephone calls, emails and text messages. Landlords should take into account tenants’ preferences about how they are contacted and consider a range of different ways in which to contact tenants. [14] Where tenants have particular support needs, or are vulnerable or under 18, landlords should take this into account when offering them advice and assistance. Where appropriate, landlords’ communications with tenants should include their support worker, or advocate if one has been appointed. [15]

When complying with this pre-action requirement landlords should provide tenants with the contact details of appropriate agencies where they can get advice and assistance. For example: Citizens Advice, money advice specialists, welfare rights agencies or any other advice agency available locally. Landlords can if they wish, make a formal referral to such an agency. [16] However, simply providing the tenant with details of advice agencies may be enough to satisfy the pre-action requirement.

Tenants must be referred to information on how find advice to help manage their debts. [17] The sources of advice should be free and independent. [18] Agencies similar to those suggested for advice and assistance would be appropriate to comply with this pre-action requirement. It is up to the tenant whether they contact any of the agencies suggested. If they wish, landlords are still free to formally refer tenants to a particular service where appropriate.

Landlords should make reasonable efforts to agree a repayment plan with tenants. This should include any other debt connected to the tenancy, along with future payments of rent. [19]

Making reasonable efforts to agree a payment plan

In making reasonable efforts to agree a repayment plan landlords must:

• make prompt and reasonable attempts to contact the tenant to talk about the arrears, with a view to agreeing a plan for future payments of rent and repayment of the arrears, plus any other outstanding financial obligation of the tenancy

• encourage tenants to give them all relevant information relating to their financial situation

• advise tenants to get advice from an appropriate debt advice agency, where tenants inform landlords that they have other debts on top of those related to the tenancy 

• give tenants clear details of any proposed payment plan along with a copy of the plan

• give tenants time to consider any proposed payment plan

• consider how affordable the plan is for the tenant, where possible taking into account the tenant’s personal and financial situation. 

The aim is for landlords and tenants to come to a suitable arrangement to pay off the arrears. In doing this landlords should encourage tenants to give them as much information on their situation as possible. Landlords should:

• explain why they’re asking for this information

• ask them to be honest about their situation 

• explain that they are going to use this information to draw up a payment plan. [20]

Informing tenants of a payment plan

When landlords inform a tenant of a payment plan it should be clear that the payment plan is based on:

• future payments of rent

• repayment of the arrears

• any housing benefit or arrears of housing benefit

• any other income. [21]

Creating payment plan when a tenant's income is unknown

When trying to put together a payment plan where a tenant’s income isn’t yet known or they’re awaiting the result of a housing benefit application landlords can either:

• estimate the amount of housing benefit that they’ll receive and taken this into account in the payment plan or

• ignore the tenant’s unknown income for the purposes of the payment plan, once this is know it can be taken into account. [22]

It’s up to landlords how they approach this, the important thing is that tenants understand what's expected of them. If landlords and tenants can’t agree on a plan then landlords are expected to make reasonable efforts to attempt to come to an agreement before resorting to court action. [23] If a tenant proposes a payment plan but the landlord turns this down, the landlord must give the tenant their reasons for turning this down in writing. [24]

Landlords should not pursue an eviction action where tenants:

• have applied for housing benefit but their application hasn’t been decided yet, and it’s likely that it’ll either pay off or reduce the arrears, plus any other debt, to an acceptable amount

• are taking action which, in the landlord’s view, is likely to result with the arrears and any other debt, being paid off in a reasonable time, or

• where tenants are complying with the agreed payment plan.

Where a tenant has applied for housing benefit

Landlords should encourage tenants who have made a housing benefit application to give them permission to speak to the local authority about their application, [25] explaining to the tenant why they need to do this. They should obtain written permission from the tenant and make it clear that they’ll use this to get information on the likely result of the housing benefit claim. [26] If landlords get this permission they should use to find out whether a housing benefit application has been made, if so, when the a decision is likely to be reached, find out whether the tenant has given the local authority all the information they need to reach a decision and find out what the likely decision will be. [27] If a tenant does not give their landlord permission to contact the local authority, landlords should not go ahead and contact local authority staff anyway. In this situation they can draw from their experience of the housing benefit system, ask for general from housing benefit officers, or other benefit advice specialists and use online housing benefit calculators. [28]

Landlords need to consider whether a tenant’s housing benefit claim will reduce the arrears to an amount that they consider to be acceptable. If not they need to explain this to the tenant. Landlords should note that they may also have to justify this decision to court. [29] If landlords can’t find out the likely outcome of a tenant’s housing benefit claim they should still make reasonable efforts to agree a payment plan with the tenant. [30]

Other steps taken by tenants to pay off the arrears

Landlords should also try to find out if tenants are doing anything else to pay their arrears, they should look at all the evidence they have of steps tenants are taking, and consider whether these will result in the arrears being paid off in a reasonable time. [31] Landlords should encourage tenants to provide them with as much information on their personal circumstances as possible as they can only make assessments on the likely payment of the arrears on the evidence in front of them. [32]

If a landlord decides that the time in which the tenant will pay off the arrears is not reasonable they should explain why this is the case to the tenant. Landlords may also have to justify this decision in court. [33] If the other steps taken by the tenant will result in the payment of the arrears in reasonable time, then landlords should not pursue an action for possession. Should the tenant’s actions not result in the payment of the arrears then landlords are within their rights to raise a possession action against the tenant, so long as they have complied with all of the other pre-action requirements. [34]

Where tenants are complying with an agreed payment plan

Landlords should not pursue a possession action where the tenant is complying with the terms of an agreed payment plan. [35] When landlords are evaluating whether a tenant is sticking to the terms of an agreed payment plan they must:

• swiftly take reasonable steps to determine the reason for the tenant being unable to comply with the payment plan

• look at whether the payment plan is still affordable for the tenant, taking into account their circumstances

• where the payment plan has become unaffordable they should review it

• tenants should be given reasonable time to:

  - continue making payments in line with the agreed plan and catch up with any missed payments, or

  - start a new payment plan with the landlord. [36]

As soon as a landlord finds out that a payment plan is not being kept to, they should contact the tenant to find out why this is the case. If there has been a significant change in the tenant’s circumstances then landlords should take this into account when deciding whether to draw up a new payment plan. [37] If a landlord thinks that the payment plan should stay the same then they should give the tenant reasonable time to comply with the plan. It’s up to landlords to decide what is reasonable time to comply. [38] If compliance is not possible then landlords should make reasonable efforts to agree a new plan with the tenant. [39]

Landlords are required to encourage tenants who have fallen into rent arrears to contact their local authority if they are considering an eviction action. [40] Local authorities should give tenants advice on their financial and housing situation. Landlords could do this by writing to tenants once they’ve fallen into arrears outlining why it’s a good idea for them to get in touch with their local authority. [41]