The government is consulting on abolishing section 21 notices and assured shorthold tenancies.
Earlier this year, the government announced its intention to abolish Section 21 of the Housing Act 1988, to almost universal dismay from private residential landlords who have come to rely on the fast-track possession procedure to rid themselves of difficult tenants.
The government’s latest consultation, A new deal for renting: resetting the balance of rights and responsibilities between landlords and tenants, goes one step further and proposes abolishing assured shorthold tenancies (“ASTs”) altogether, with assured tenancies set to become the norm.
An estimated 4.5 million households live in privately rented accommodation in England, including many people over 55 and 1.6 million families with dependent children. Most of them occupy under ASTs.
Section 21 allows a landlord to terminate an AST, once the initial fixed term has expired, against the tenant’s will and without fault by the tenant, on two months’ notice.
Why change now?
When ASTs were introduced thirty years ago, renting was seen as a more transitional form of housing tenure, mostly for young people on their way to home ownership. Few of them, particularly those bringing up families, expected or wanted to remain in the private rented sector for life.
The government wants private renters to be able to put down roots in communities and schools without fear of having to move at short notice. At the same time, government homelessness statistics suggest that the ending of a private tenancy on a no-fault basis has become the single largest cause of homelessness.
On some key points, the consultation clearly sets out the government's position; on other issues, the consultation invites views through a series of questions.
Abolition of Section 21 and ASTs
Section 21 will be abolished by getting rid of ASTs. In future, most residential tenancies will be assured tenancies.
The consultation seeks views on whether there should be exceptions for certain types of landlords, such as housing associations, local authorities, providers of supported accommodation and providers of rent-to-buy products.
Length of tenancy
Currently, an AST must be granted for a minimum six month term. There is no upper limit and a majority of tenancies are for 12 months.
In future, tenancies will either be open-ended, or for a fixed term.
The consultation seeks views on whether fixed term tenancies should have a minimum length, and if so, how long: six months, 12 months or two years?
Is two months’ notice to quit sufficient, and if not, how much notice should tenants receive?
Currently, tenants may give notice at the end of the term but landlords can only terminate a tenancy by serving either a Section 21 notice (see Who rents? above) or a Section 8 notice, warning the tenant that the landlord intends to seek possession on one of the (mostly fault-based) grounds in Schedule 2 to the 1988 Act.
Use of the Section 21 procedure does not usually involve a court hearing, as the notice may be served without the tenant being in breach of its tenancy. It is not surprising therefore that surveys show that landlords regain possession of their properties more quickly, and at significantly less cost when using Section 21, compared to Section 8.
In future, tenancies may only be ended under Section 8 or if there is an agreed break provision in the tenancy agreement.
Amending Section 8 grounds
The Section 8 grounds for seeking possession will be expanded.
Property needed for landlord or family
The consultation asks whether a landlord should have a right to recover possession, during the fixed term, in order to sell the property, or if a family member wants to move in. This reflects the current trend of landlords buying a property for their children and letting it out until they are old enough to move in.
The consultation also seeks views on its proposed length of notice (two months), whether a landlord should be able to recover possession during the first two years of a tenancy, and whether the tenant should be given prior notice, at the start of the tenancy, of the possibility of losing possession on these grounds.
Currently, a landlord can seek possession if a tenant has two months’ arrears of rent both at the date of service of the Section 8 notice and at the date of the hearing. This gives tenants an opportunity to reduce the arrears to just below the threshold before the hearing, forcing the landlord to start all over again.
The consultation invites views on reducing the notice period to two weeks if the tenant is two months in arrears, with mandatory possession if the tenant has one month or more arrears outstanding at trial or if the landlord can show that the tenant has built up and then paid down rent arrears on three previous occasions.
Deterioration of property
Deterioration of the property below legal standards is already a ground for possession. The consultation asks whether landlords should also be able to seek possession where a tenant routinely refuses them access to enter the property to carry out essential maintenance and repairs.
There is a series of questions relating to anti-social behaviour and domestic abuse.
The consultation is opposed to rent control ‘at the outset’ of a tenancy but proposes use of the currently infrequently-invoked section 13 of the 1988 Act to set a market rent after expiry of the fixed term. The section allows tenants to ask the First-tier Tribunal (Property Chamber) to decide the rent, if necessary.
Landlords will still be able to adjust the rent in line with market levels by negotiating a new fixed-term tenancy with the tenant.
In the social housing sector, rents are regulated, and therefore unlikely to be affected by this proposal, although the consultation does not make this explicit.
The consultation invites views on the introduction of a new mandatory ground for possession relating to dwellings on agricultural holdings, where either the dwelling is sub-let and the head tenant wishes to end its agreement and retire, or there is a business need for the landlord to gain possession, i.e. so they can re-let the dwelling to another farm worker.
ONE SIZE DOES NOT FIT ALL
The consultation attempts to deal with a wide assortment of housing tenancies and suffers as a result.
- The government claims that tenants falling into rent arrears or damaging property is a “rare event” but as a general rule, landlords do not want to evict tenants for no reason.
- Whilst Section 8 will force landlords to state their reasons for requiring possession, improving transparency, this will not necessarily reduce the number of evictions, although it may discourage landlords from serving notices for trivial breaches.
- Despite the government hype, the proposed new Section 8 grounds for possession are fairly limited and unlikely to console landlords for loss of the popular Section 21 procedure.
The consultation recognises the need to underpin its proposals with a simpler, faster court process.
The government says it will achieve this by digitising the court process - making it easier and simpler to use and reduce landlord errors in making and preparing evidence - and re-prioritising bailiff resources to speed up evictions by approximately one week. Whilst these steps may expedite matters at either end of the process, extra resources will be essential to deal with the inevitable increased number of court hearings.
The consultation asks whether some Section 8 grounds could be dealt with by accelerated proceedings, i.e. without a court hearing. However, most of the Section 8 grounds involve evidential matters that need to be tested in court, so it is not clear how this would work in practice.
If the government wants to avoid discouraging investment in the private rented sector market, substantially improved court procedures will need to be in place and adequately resourced before the abolition of Section 21.
Different groups of tenants have divergent needs. A two year minimum term (which is the longest of the proposed options) is not going to meet the needs of families with children or those looking for somewhere to live out their retirement, whilst those leaving home, moving to a new city and trying out a variety of jobs and lifestyles may consider two years an overly-long commitment.
However, this consultation should not be viewed in isolation. The government is – or was, before Brexit became all-consuming – considering changes to social and retirement housing, whilst the burgeoning institutional build-to-rent market, aimed at younger tenants earning above average salaries, typically offers longer tenancies, but at a cost that excludes many lower income households.
The consultation ends on 12 October 2019.
Please contact Joanna Nicholls or Deborah Caldwell if you want to discuss the proposals in more detail or have any queries about residential tenancies.
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