Should we be worried about the proposed changes to s.21 and to the private rented sector?

The Government has announced plans to consult on new legislation to abolish section 21 Housing Act 1988 notices. The Government’s press release on 15th April 2019, “Government announces end to unfair evictions” states that the change is necessary because 4.5 million people in England (19% of households) live in private rented sector accommodation. The proposal is to remove section 21 notices, speed up the section 8 eviction process and to amend the grounds of possession to include new grounds when a property’s owner needs possession in order to sell it or to move into it. Scotland, by the Private Rented (Tenancies) (Scotland) Act 2016, abolished assured shorthold tenancies (AST) and section 21 notices from 1st December 2017. It will be interesting to see whether and to what extent English law follows the Scottish framework.

The problem

The Government response “Overcoming the barriers to longer tenancies in the private rented sector” published in April 2019 stated that those living in the private rented sector include people over 55 years old and 1.6 million families with dependent children, both of which groups require more secure accommodation. The demand for private rented sector housing is increasing. At the moment, a landlord wishing to end an AST has 3 choices. Firstly, to serve a section 21 two month notice and seek possession without having to prove a ground for possession in proceedings which will not automatically be listed for a court hearing. Secondly, to serve a section 8 notice and seek possession by proving a ground of possession and at a hearing, including ground 1, if they wish to live in the property and formerly used it as their principal home. Thirdly, to serve both a section 8 and a section 21 notice and bring proceedings in the alternative which will automatically be listed for a first hearing.

The current (and future) restrictions on serving section 21 notices

What, if anything, could be lost by the removal of the section 21 process? A private landlord wishing to issue possession proceedings using section 21 currently has to overcome a number of obstacles before they can serve a section 21 notice in Form 6A or a written document which must be substantially the same.

A section 21 notice cannot be used if any of the following apply:

• the fixed term has not ended, unless there’s a clause in the contract which allows the landlord/agent to do this
• the council has served an improvement notice on the property in the last 6 months
• the council has served a notice in the last 6 months that says it will do emergency works on the property
• the first/ original AST is within the first 4 months

A section 21 notice cannot be used to bring possession proceedings unless the landlord of their agent:

• Has protected any deposit taken in a tenancy deposit scheme or return the deposit
• Served the (tenancy deposit) prescribed information in full
• Given the tenant a copy of

o   the property’s Energy Performance Certificate

o   the current gas safety certificate before they move in

o   a gas safety certificate for the property following each annual inspection

o   the government’s ‘How to rent’ guide

• has an HMO licence from the council, if the property is categorised as a house in multiple occupation (HMO)
• brings possession proceedings within 6 months of service of the notice
• where an Improvement Notice or Emergency Remedial Notice has been served by the Council, waits more than 6 months before service of the s.21 notice.

Tenant Fees Act 2019

Another restriction on serving section 21 notices as a means of enforcing compliance is due to be introduced in June 2019. From 1st June 2019, the Tenant Fees Act will take effect banning unfair lettings fees and capping tenancy deposits at 5 weeks’ rent where the annual rent is below £50,000 and 6 weeks if it is over £50,000. It will apply to AST, student lets and licences, but not company letters and non-shorthold assured tenants. A landlord will be prevented from serving a section 21 notice as long as a prohibited payment was requested, paid and held by the landlord and agent.

Given the matters above explicitly relate to the service of section 21 notice, consideration will need to be given as to whether and how these restrictions on serving a valid s.21 notice will apply. Currently a landlord who chooses to use the section 8 procedure and to establish a ground for possession, does not need to comply with the above requirements prior to serving a section 8 notice. It is not clear whether these conditions will now apply to service of a section 8 notice or whether the underlying regulations will be enforced through other means. ASTs and assured tenancies are granted by social landlords as well as private landlords and so care ,will need to be taken on this issue.

Speed of the possession process

A section 8 possession claim will always require a court hearing, unlike section 21. The court will need to ensure that sufficient resources are made available, if another 20,000 per year worth of landlord claims currently dealt with through the accelerated procedure need to be listed for at least one hearing.

From the landlord’s perspective, the 5 to 6 months that it currently takes to obtain possession of their properties from those they have granted AST to makes it less desirable to offer longer tenancies or to seek possession after requiring the court to find a ground of possession. Between July and December 2018, 18-19% of all landlord possession claims were accelerated claims, 19% to 20% were private landlord claims and the remaining majority were social landlord claims. The most recent Mortgage and Landlord Possession Statistics in England and Wales published by the Ministry of Justice for the 2 quarters from July to December 2018 show that from claim to repossession by county court bailiff the median average time taken to progress to possession for all tenure types was between 19.1 and 19.4 weeks, with accelerated cases taking an average if 16.7 weeks (July-Sept 18) and 18.1 weeks (Sept-Dec 2018) and private landlords 16.1 to 16.3 weeks and social landlords 28.3 to 28.4 weeks. When the 2 months’ notice period is added to the time taken to regain possession, this makes 24.7 weeks to 26.1 weeks from service of notice to repossession. It is clear then that the current system already requires expediting to make the possession process more efficient.

The Government’s 15th April 2019 press release stated that Courts and Tribunal Service Possession Reform Programme will digitise the court process, making it easier and simpler to use and reduce landlord errors in making and progressing possession claims. Further, that bailiff resources will be freed up to help them prioritise possession claim. The potential benefit of a dedicated housing court is still being considered. There is a clear need for the Government to ensure that a quick and efficient possession process is in place before introducing any changes, so as not to discourage ivestment in the private rented sector market.

Length of tenancy

Following the government’s consultation on 2nd July 2018 about the new 3-year longer tenancy model, there was no consensus around mandating a certain tenancy length with tenant’s favouring different lengths depending on their circumstances and landlord’s preferring the status quo. In Scotland, the solution adopted to provide greater security was to introduce Private Residential Tenancies to replace ASTs with no fixed end dates.

New proposed grounds for possession

Will the new proposed grounds apply to all assured tenancies, including social housing? Will a landlord be forced to increase rent in order to gain possession? In Scotland, PRT have more predictable rents and protection for tenants against excessive increases. There is also an ability to instruct rent caps. It will also be interesting to see how local authorities, landlord and tenants will handle situations, in which a tenant is able to obtain re-housing from the Council by arguing that they did not make themselves intentional homeless because it was a “no-fault” section 21 eviction.

The Private Rented (Tenancies) (Scotland) Act 2016 provides 18 specific circumstances including a new ground where a property has been abandoned and where the landlord wishes to sell. 84 days’ notice to leave must be given to a tenant, if they have been there for over 6 months, in most situation. There are 8 mandatory grounds. These are as follows: the landlord intends to sell the let property within 3 months of the tenant moving out, the let property is to be sold by the mortgage lender, the landlord intends to refurbish the property by doing major works which are so disruptive that a tenant could not live there, the landlord intends to live in the let property, the landlord intends to use the property for non-residential purposes, the landlord requires the property for a new religious worker, the tenant has relevant criminal procedures and the tenant is no longer occupying the property. There are 6 discretionary grounds in which a possession order will only be made if the ground is made out and it is reasonable to make a possession order. These are as follows: the landlord’s family intends to live in the let property, the tenant no longer needs supported accommodation, tenant has breached the terms of the tenancy agreement, the tenant has engaged in relevant anti-social behaviour, the tenant has associated in the let property with someone who has a criminal conviction or has engaged in ASB, the landlord has had registration refused or revoked and the landlord’s HMO licence has been revoked or an overcrowding statutory notice has been served on the landlord. 2 of the grounds for possession can be mandatory or discretionary, depending on the circumstances: where the tenant is in rent arrears over 3 consecutive months and where the tenant has stopped being or has failed to become an employee.

Conclusions

Having failed to obtain a consensus about giving tenants the security of a longer 3-year tenancy, the government is planning to remove the landlord’s ability to obtain “no fault” possession orders until they can discharge the burden of proving a statutory ground for possession. Given that both the Labour and Conservative parties have now indicated a desire to give tenants more security through longer tenancies and to get rid of section 21 evictions, it seems likely that England will follow Scotland’s lead. What lessons can be learnt from Scotland and will the government make similar decisions about the length of tenancy, new grounds for possession, rent increases and speeding up the court process? Further, how will the statutory protection currently provided to those with AST in relation to tenancy deposits, gas safety certificates etc which are tied to the ability to seek no-fault evictions be enforced? There is no doubt that some reform is necessary, as the section 21 process can be unnecessarily complicated for landlords and the process can be time-consuming and lengthy. In my opinion, there is a need to speed up the existing section 8 process and ensure that it is fit for purpose before adding tens of thousands of new possessions claims to the county court’s list.