Will Landlords Cope with New Tenancy Law?

The Deregulation Bill 2015, which includes measures introduced by the Tenancies (reform) Bill concerning so called 'revenge' or retaliatory evictions, has now been passed by the House of Lords and should gain Royal Assent before the dissolution of Parliament on 30 March 2015.

This Bill contains a number of significant measures of serious interest to landlords and letting agents in relation to Assured Shorthold Tenancy agreements (?ASTs?).

Although Shelter claim the Bill will put a stop to revenge evictions in the private rented sector, perpetrated in the main by rogue landlords, many responsible landlords fear it will create numerous problems for them as well.

What is Revenge Eviction?

Most tenancies (around 95% with working and professionals) in my experience progress without problems and end gracefully when the tenant decides to leave by giving notice. However, there are problems on the fringes of buy-to-let where you have a small percentage of rogue landlords and equally a small percentage of bad tenants. These percentages tend to increase when you are dealing with HMOs, and Housing Benefit tenants. Many of the latter would have traditionally been housed in the shrinking social housing sector.

Many in the industry argued from the start that Shelter?s figure of 200,000 'revenge evictions' per year was wildly exaggerated, especially as the Protection from Eviction Act 1977 and the section 21 process means no tenant can be legally evicted in less than 3 to 6 months. However, that?s not to say it never happens.

Section 21 Evictions

Landlords who have not protected their tenants' deposits, or have not licensed their property when it is required by one or other of the schemes, are already prevented from serving Section 21 notices requiring possession.

This Bill will add to this the necessity to show that Gas Safety and Energy Performance Certificates (EPC) are in place as well, and perhaps more onerous, that the tenant has not made a valid complaint about poor conditions in the property.

In theory this should improve conditions in rental properties generally, especially at the bottom end of the market, and give tenants the confidence to report problems, allowing landlords to take appropriate and timely action, without threatening eviction.

In practice this means that landlords will be prevented from evicting tenants in response to a local authority intervention about the condition of their property. In other words landlords / agents will be unable to serve a valid no-fault Section 21 notice requiring possession for a full 6 months following the issue of a local authority improvement or hazard awareness notice.

As the Bill stands, where the tenant has made a written complaint to the landlord about the state of repair of the property, and the landlord has either failed to respond, given an inadequate response, or responded by serving a section 21 notice, the tenant can prevent eviction by contacting the local authority housing / environmental health department. Officers may then serve various types of enforcement notice on the landlord. The landlord would be prevented from serving a new section 21 notice within six months of an enforcement notice being served.

Therefore, for the first time since the introduction of the AST in 1988, which was so successful in expanding the UK lettings market, the decision as to who and when a landlord can evict, once their tenancy and a minimum of 6 months is up, is taken out of their hands and placed firmly in the lap of a local authority officer.

Proponents argue the Bill will not allow tenants to use spurious or malicious complaints as a defence to eviction, and will not leave Section 21 hearings open to abuse, nor place additional burdens on responsible landlords.

However, landlords are sceptical about these claims, knowing how these issues can escalate, especially when they have experienced bad or difficult tenants in the past, and have been involved in disputes and the eviction process.

As I see it there are several sticking points to these new rules:

  1. The fact that tenants must put requests over repairs in writing to the landlord must be a good thing as it prevents last minute spurious dilapidation claims in court. But will this mean they cannot involve the local authority before the landlord has been given a chance to remedy the claimed defects?
  2. Agreeing just what is needed, between landlord, tenant and the local authority inspector may be problematic. This could be especially true in cases of so called damp and condensation where the tenant has been responsible for this. Apportioning blame for condensation and mould is often contentious and, without experience in this field, tenants, landlords and even local authority inspectors often come to the wrong conclusions. See: The Condensation Conundrum – http://www.landlordzone.co.uk/landlordzone-update/the-condensation-conundrum
  3. Gaining access to do repairs can be a nightmare for landlords when the tenant is in occupation. Not only do missed appointments for access drive tradesmen mad, anything major will require the tenant to move out. Some tenants just refuse to cooperate in the process and I can see this as a tactic being used to stymie evictions.
  4. Local authority housing inspectors and internal town hall bureaucracy can delay the process for months.

Just how the delays in the process will work out in practice remains to be seen, as it will rely on authorities inspecting and serving enforcement notices quickly. Authorities, not usually renowned for speedy action, and already complaining about being overloaded, short of staff and short of money, will be even more burdened when this comes in.

Changes to Section 21 Notices

It will no longer be possible to serve a section 21 notice at the start of a tenancy for use at a later date, and with no time limit to its use.

The Bill prevents service of a section 21 notice at the start of an AST, requiring that it cannot be given no earlier than four months after the beginning of the tenancy. The section 21 notice will also need to be used within six months of being served, or otherwise it will lapse and a new one will need to be served.

Prescribed form

There is to be a prescribed form of section 21 notice with no need to specify a termination date coinciding with the last day of a rental period, which addresses the points raised in Spencer v Taylor. This is without doubt an improvement as serving section 21 notices correctly has been notoriously difficult and many possession claims have been thrown out on this technicality in the past.

Tenancy Deposits

The Bill incorporates yet more clarifications to the Tenancy Deposit Scheme (TDS) rules.

Since its introduction in April 2007 the legislation set out in the Housing Act 2004 has been the source of much confusion and many landlords and agents have been caught out. Developing case law has been the cause of several amendments since.

This new Bill now mean:

  • When a deposit was received in respect of a fixed-term AST before 6 April 2007, which subsequently became a statutory periodic AST after 6 April 2007, the landlord will not now be penalised if the landlord or agent protects the deposit and provides the relevant prescribed information within 90 days of the Bill gaining Royal Assent. This point is in response to the case of Superstrike v Rodrigues;
  • When a deposit was received after 6 April 2007 and placed in a Tenancy Deposit Scheme (TDS), and the prescribed information correctly served, then upon the AST becoming a statutory periodic tenancy, the landlord’s compliance with the TDS legislation in respect of the original AST will suffice for the purposes of the statutory periodic tenancy. This amendment gives no protection to landlords / agents who never protected the deposit during the original tenancy, but is a major change to the current situation where landlords must confirm protection and re-serve the statutory (s213) notice.
  • Landlords of tenancies which became periodic before the tenancy deposit scheme came into force on 6 April 2007, which was generally considered as a situation where the existing deposit did not need to be protected, will now need to protect those deposits as per Charalambous v Ng, and the new legislation confirms that there will be no financial penalty for failing to do so;
  • It will now be possible once the Bill becomes effective, for an agent to give their details in the prescribed tenancy deposit information (s213 notice) to the person or persons lodging the deposit, instead of those of the landlord.

Other minor changes include:

  • The section 21 notice will be invalid where the landlord or agents fails to provide a current Gas Safety Certificate and Energy Performance Certificate (EPC) – the landlord is obliged to provide information.
  • It is to be a legal requirement of an AST that landlords / agents provide tenants with information about the rights and responsibilities of the landlord and the tenant.
  • Where rent has been paid in advance, tenants who have been served a section 21 notice requiring possession will have the right to reclaim rent paid in advance in respect of any period after a section 21 notice brings the tenancy to an end.

The Deregulation Bill 2015, when effective, which is likely to be later this year (possibly October), introduces some sweeping changes to the operation of ASTs, some good, and some not so good for landlords.

It will be interesting to see how landlords / agents cope with these changes, what amendments and changes may be needed in the future as cases come to court, and in particular how well the so called revenge evictions measures operate.

One thing is for certain: landlords / agents will need to be fully aware of the rules and be extra diligent in the way the collect and retain documentary evidence if they are to avoid major problems with tenancies in the future.

Deregulation Bill 2015

... LandlordZONE.

Article courtesy of LandlordZONE
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