Section 21 notices just got harder
Mark Banham reports on big changes to section 21 notices coming into effect in October 2015. There is plenty to think about for landlords and letting agents and planning ahead is essential.
Section 21 of the Housing Act 1988 lies at the very heart of modern tenancy law in England and Wales. A notice validly served under section 21 will force a court of law to grant a possession order without the landlord having to establish a “ground” for possession. Under the Rent Acts (applying to tenancies granted before 1989) tenants enjoyed strong security of tenure and could only be evicted only limited grounds. The Thatcher administration began to change all this with the introduction of shorthold tenancies in 1980. In 2015 the pendulum begins to swing back in favour of tenants.
New provisions enshrined in the Deregulation Act 2015 will impose restrictions on a landlord’s ability to give a section 21 notice to end a tenancy. Before looking at the detail, it is important to make the point that (with one exception referred to below) the new rules will only apply to new assured shorthold tenancies (ASTs) entered into on or after 1st October 2015. In the case of a statutory periodic tenancy arising on the expiry of a fixed-term tenancy which starts before 1st October 2015, landlords in that situation may be pleased to learn that the old section 21 regime will continue to apply to the periodic tenancy.
The changes may be summarised as follows:
For tenancies which first begin on or after 1st October 2015 it will not be possible to give a section 21 notice in the first four months of the tenancy. In the case of replacement tenancies (new tenancy with same parties and same premises as previous tenancy), the relevant period is four months from the day on which the original tenancy began.
The new provisions also stipulate that, once a section 21 notice has been given, possession proceedings must be commenced (where appropriate) within six months of the service of the section 21 notice. In other words, “use it or lose it”. For notices given under section 21(4)(a) – relevant in the case of statutory periodic tenancies – the relevant period is four months from the date of expiry of the notice.
The prevention of service of a section 21 notice during the first four months of a tenancy may be annoying for any landlord who has created a six-month tenancy as it will be practically impossible to time the service of the notice correctly to have the tenant leave at the end of the six months.
Prescribed form of section 21 notice
The government now has the power to prescribe the form of notices to be given under section 21. This power comes into effect on 1st July 2015 and we must wait and see what the new prescribed forms will look like. Once the new forms have been prescribed, they will have to be used for any new tenancy commencing on or after 1st July 2015.
Relaxation of date requirement in section 21(4) notice
This is a somewhat technical change but it may come as a relief to those landlords and letting agents (not to mention their professional advisers) who struggle to count days correctly. Under the new rules, the need for a landlord to specify the last day of a period of the tenancy as the date on which the tenancy comes to an end will be removed. However, while this certainly removes an element of precision from the wording of the notice, landlords and letting agents should still be aware that the date specified in the notice must still be (a) not earlier than 2 months from the date on which the notice is given and (b) not earlier than the earliest date on which the tenancy could be brought to an end under the traditional common law rules (by means of a notice to quit).
This is the area of new law likely to cause the biggest ripples in the residential letting market. For tenancies which first commence after 1st October 2015, the service of any improvement notice under the housing health and safety rating system by the relevant local authority or the carrying out by them of any emergency remedial action will mean that a landlord will not be permitted to give a section 21 notice for six months. That deals with the situation after an improvement notice has been served. But what about the situation where, before any involvement by the local authority, the tenant has made a complaint to the landlord or his letting agent?
Where a tenant makes a complaint about the condition of a property in writing, the landlord will have to respond within 14 days in writing setting out what he intends to do about it and what the timeline for doing this is. If the landlord (a) fails to reply or (b) replies by serving a section 21 notice or (c) gives a reply that is inadequate, then the tenant may complain to the local authority who must inspect the property. If the local authority then serves an improvement notice or carries out emergency remedial action, any section 21 notice already served will be rendered ineffective and no further notice can then be served for six months. This provision (set out in section 33 of the Deregulation Act 2015) lacks clarity in a number of respects and it remains to be seen how it will work in practice.
The following potential problems are immediately obvious:
Local authorities are likely to be faced with a substantial increase in demands to carry out inspections and one can imagine that they might not be able to cope, at least not within a reasonable timeframe.
The courts are likely to have to deal with more defences to section 21 claims and this could substantially impact on the accelerated possession process. The pressure on courts to deal with extra hearings could, it is thought, cause the possession process to become untenable.
Landlords are likely to find themselves facing many more complaints about condition. This is not in itself a criticism of the new regime but it seems inevitable that some complaints will be more tactical than genuine. If the simple method of ending a tenancy by giving a section 21 notice becomes problematic because of a complaint made by the tenant, landlords in future faced with a tenant who is not paying rent might be forced down the route of using a section 8 notice and establishing a statutory ground for possession. What previously could be a simple and cheap process instigated without the help of a lawyer now potentially becomes a much longer and more costly exercise.
Other potential hurdles
There are two other potential limitations on a landlord’s ability to give a section 21 notice. First, there is a new power for regulations to be made requiring a landlord to give to tenants information about their rights. This is likely to mirror similar information required in Scotland. Secondly, regulations may be made prohibiting the giving of a section 21 notice if specified matters relating to health and safety, property condition or energy performance have not been met.
As will be obvious from this overview of the new law relating to section 21 notices, there is a substantial body of new regulations to get to grips with – ironic given that these are contained in something called the Deregulation Act 2015. Letting agents are likely to have to make substantial modifications to their existing systems and processes and landlords and tenants will need to understand their new rights and obligations. Only time will tell whether the new law represents a measured re-balancing of the interests of landlord and tenant or whether it will instead destabilise the rental market.