The Tory manifesto barely mentioned property and when pressed many senior party members seemed keen not to ‘meddle’ in free markets. But landlords and agents were in for a surprise.
A raft of regulatory changes and tax increases have been introduced (or coalition legislation in the pipeline passed) designed to better control the management of rented properties and reduce their appeal to buy-to-let investors.
The Government is using the Section 21 notice as a lever to force landlords to adhere to other procedures such as deposit security, and gas safety.
One reason for this is that the government, indirectly, is a landlord itself. “It would seem right that the bureaucracy that pays out £billion in housing benefit each a year should want an assurance that the property it is paying for on a tenant’s behalf is fit for purpose,” says Tessa Shepperson of LandlordLawBlog.co.uk.
Some landlords and agents are comparing it to the ‘Rachmanism’ laws of the 1960s. Those old enough to remember may recall the wave of legislation that followed the scandal when landlord Peter Rachman’s appalling exploitation of tenants in Notting Hill was exposed and a national outcry followed.
A similarly feverish environment currently exists, many say, as campaigning groups including Shelter and Generation Rent highlight malpractice and cowboy operators within the industry. Issues such as revenge evictions, unfair fees, poorly maintained properties and stolen deposits hit the headlines last year.
homes, so updates and new legislation, have followed.
“The trouble is that many landlords, agents and tenants who may not be properly trained or up-to-date with the rules face an increasingly complicated legal framework,” says Tessa Shepperson.
This legal framework, which until recently could be said to favour the landlord, now increasingly favours the tenant.
What this means for those managing rental properties is that it is now essential that they follow the proper legal procedures, many of which are new, when dealing with problem tenants. Otherwise, evicting a tenant can be both expensive, time consuming and very frustrating.
Some of the headline legal changes that lettings agents need to know about:
Section 21 (of the 1988 Housing Act) notices
This is the familiar ‘no fault’ procedure agents and landlords can use to evict a problem tenant. For example, where none of the ‘mandatory’ rent arrears or other grounds can be used.
But how the Section 21 notice works is changing. In a nutshell, the government is using them as a lever to force landlords and agents to adhere to other procedures, such as deposit security, gas safety and information provisions.
- At the start of the tenancy there are new regulations. The landlord or managing agent has to provide a current gas safety certificate and an EPC to the tenant. If they don’t do that, any section 21 notice they serve will be invalid. They can provide the documents late, which will allow them to serve a valid Section 21 notice but at some point these documents have to be provided.
- The tenant must have a properly issued, signed and drafted Assured Shorthold Tenancy agreement – otherwise the landlord will not be able to use the special ‘accelerated procedure’ when applying to the court for possession.
- The tenant’s deposit must be lodged with one of the three government-approved deposit protection services and a notice giving prescribed information served within 30 days.
- You have to serve them a copy of the government’s ‘How to Rent’ booklet – which is available on the internet. Agents have to provide a hard copy – although they can email it if the tenant agrees to that in advance. If the tenancy is renewed and the legislation (and therefore the booklet) has changed, then the booklet must be given to them again. It can be served later – but ideally at the beginning. Again, if this not provided then it will not be possible to successfully serve a valid Section 21 notice.
After a public outcry following a campaign by Shelter (vigorously opposed by the Residential Landlords Association) new legislation was included in the Deregulation Bill passed last year that restricted the way landlords and agents can evict tenants.
Retaliatory evictions are when a landlord evicts a tenant after they have complained, often to the local council, about poor conditions within a property such as damp, poor electrics or dangerous gas appliances.
- Now, if a local authority serves a Health and Safety improvement notice on a property (usually following an inspection that looks at 29 different potential hazards) then a landlord cannot serve a valid Section 21 notice for six months.
- This is retrospective. If, prior to the council getting involved the tenant had made a complaint that was substantially similar to the subsequent improvement notice, any Section 21 notice served by the landlord during the interim period (between complaint and improvement notice) will retrospectively be rendered invalid. If a tenant has made a complaint, the landlord now must reply within 14 days to the tenant to say how and when they are going to do the fix the problem.
- There is a grey area here. If a landlord replies to a tenant’s complaint within 14 days as set out in the legislation does that mean that any section 21 notice is not retrospectively invalidated by a Local Authority notice? Legal opinion is divided – should you face this situation detailed expert advice will be needed.
“I’ve been in discussion with Rajeev Nayyar of Fixflo, his view is that if the landlord complies with the requirements then a subsequent Section 21 notice served before any Local Authority notice is served, would be valid – but I have reservations,” says Tessa.
“Really, it’s better if the landlord gets the property into the right condition in the first place so that the local authority don’t serve an improvement notice.”
Time limits for using Section 21
- Landlords or agents can’t serve a Section 21 notice within four months of the start of a new tenancy, (you can if it’s a renewal).
- You can’t start proceedings for possession based on a Section 21 notice:more than six months after the notice was issued or…
- where the tenancy is a periodic one where the notice period is more than two months, more than four months after the date given in the notice.
“Even if you’re a day late then when it gets to court there will grounds for the eviction not proceeding,” says Tim Jordan of FDRLaw.co.uk. “The judge will be strict because the tenant is not represented and they may have good reasons for being in this position, generally speaking the judge will bend over backwards to help a tenant if there are grounds for doing so.”
Grounds for possession fall into two categories – discretionary and mandatory. This means a judge can consider and refuse to make an order for possession based on a discretionary reason (such as anti-social behaviour inside a property) while a possession claim based on a mandatory ground will always be granted, if it can be proved. The most common mandatory ground is unpaid rent. But Tim Jordan thinks the legal route when tackling unpaid rent should be the last resort.
“The first thing to do is to have a discussion with the tenant about why they haven’t paid their rent – there’s usually a reason, particularly if a tenant has been a good payer before,” he says. “It’s always better to have a discourse about the problem; try to get things back on track rather than use heavy handed legal tactics straight away.”
If they don’t, Section 8 of the 1988 Housing Act can be used. Under it, if a tenant falls behind in their rent and is more than two months in arrears, then a Section 8 notice can be served and the legal process of evicting them begun.
Provided the tenant is in arrears of two months or more (1) on the date the section 8 notice is served and (2) on the date of the Court Hearing for possession, the Judge cannot refuse to make the possession order.
“There is now a prescribed Section 21 form which must be used for all tenancies in England that were renewed or started on or after 1st October 2015,” says Tessa. “The government says you can use it for tenancies renewed or started before that date, but my advice to letting agents is don’t – use one of the old ones. Using the new one will confuse your tenants as the notice cites legal requirements which do not apply to older tenancies.
“Agents also need to ensure they are using the correct form – the original ‘new’ form had a massive error within it and was withdrawn, amended and re-issued – so be careful.”
A landlord’s experience
Shirlene Berenji has built up a modest portfolio of buy-to-let properties over 30 years with her partner in Eastbourne. She believes the pendulum has swung too far in a tenant’s favour as new regulations have been introduced.
“Just the amount we spend on solicitors’ fees, never the mind the hassle, is beginning to get out of hand – our tenants are well informed about the laws of eviction and know how to play the game. They usually leave it to the very last moment before the bailiffs turn up before doing a flit so we have to get solicitors involved.
“It’s becoming such as pain that I wish I could persuade my partner to get out of buy-to-let. The recent switch of payments directly to tenants hasn’t helped either. I’ve seen it happen before and it doesn’t work.”