A Disaster for Landlords –
The End of Section 21 Notices?
The Government has just announced that it is going to consult on abolishing Section 21 Notices the law used by landlords to evict a tenant under an assured shorthold tenancy (or AST).
At the outset, it is important to stress it is almost always necessary to take court proceedings to repossess residential premises. A Section 21 Notice is given under Section 21 of the Housing Act 1988. Such a Notice permits a so-called ‘no fault’ eviction of a tenant renting residential premises under an AST. As things presently stand, a landlord can always regain possession of the property at the end of the fixed term granted by the AST by giving the tenant a two-month Section 21 Notice. Where such a Notice has been given the Court has no discretion in the matter. It must give a Possession Order.
Alternatively, a landlord can terminate an AST at any time by serving a Section 8 Notice. However, such a Section 8 Notice may only be given on one or more of the grounds specified by the Housing Act and it must be backed up by evidence. Many of the grounds involve establishing fault on the part of the tenant, such as failing to pay rent, breach of the terms tenancy or criminal or anti-social behaviour.
As one might expect, the announcement has been warmly welcomed by charities and tenant lobby groups and by howls of protest from bodies representing landlords’ interests. However, as yet there isn’t much detail on what the Government has in mind. The Government is also talking about improving the rights of landlords who need to repossess a property because they wish to sell it or occupy it themselves. The Government also says it will take steps to speed up the court eviction process in relation to Section 8 Notices (but we have heard such promises before!).
It may be helpful to look at the proposed changes in a broader context. Security of tenure and rent control was first introduced for residential tenants in 1916 in the middle of World War I. Although often the subject of political controversy and constant political tinkering, the basic structure of the law remained much the same until 1980. One of the first acts of the reforming Thatcher Government was to introduce protected shorthold tenancies, the forerunner of ASTs. By the time of the reforms, the residential rental market had almost completely stagnated. Fewer and fewer people were willing to let residential property because of the fear of not being able to regain possession of a property from a tenant and effectively losing the property on a permanent or semi-permanent basis. For example, a person who got a secondment abroad might decide it was safer just to leave their property unoccupied rather than risk not being able to get the property back on their return. Many landlords tried to get round the law by attempting to grant licences as opposed to tenancies, but such devices seldom worked.
As with many things, it is all a question of balance. Of course, there are both good and bad landlords and good and bad tenants. It seems that some of landlords’ fears about the proposed changes may be exaggerated. It doesn’t seem likely that the current Government intends to return the pre-1980 position lock, stock and barrel. Under the old law, a tenant’s relatives had more extensive rights to inherit the tenancy on the tenant’s death than is the case with an AST. Perhaps more significantly, the old Rent Acts provided for a system of ‘fair rents’, under which scarcity had to be disregarded. Under an AST, in some circumstances during the fixed term granted by the tenancy, the tenant has the right to apply for a market rent to be set, but this right is more theoretical than real in the case of a six-month tenancy. On the other side, there are concerns that if the Government doesn’t give the changes sufficient thought, it may be possible for landlords to manipulate rent increases to obtain possession by the backdoor. Finally, another important factor may be the stance taken by mortgage lenders in relation to the changes. A lender may be more reluctant to consent to the granting of a tenancy if they think it will be more difficult to exercise their right to sell the property with vacant possession if the landlord borrower fails to comply with their obligations under the mortgage.
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