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Tenant trouble

Problem tenants are only a small minority, says Andrea Kirkby, but they can cause a huge amount of trouble for a landlord and letting agent.

Andrea Kirkby

Eviction Notice image

Usually, the fastest and most effective way to deal with problem tenants, if things have reached a stage where the problem can’t be solved, is to issue a Section 21 notice and gain possession of the property. But the changes to regulations that came in on 1st October will make life more difficult for landlords and lettings agents. (Note that the changes only apply to England.)

All new Assured Shorthold tenancies signed since 2015 have already had to comply with new rules. Now, older tenancies are also being required to comply; as Paul Shamplina of Landlord Action says, “all old tenancies are now new tenancies”. It’s just the kind of rule that will catch landlords with long-established tenancies out. If all the requirements of the regulations aren’t met, you won’t be able to serve a valid Section 21 notice, and evicting a problem tenant will become much more difficult and costly.

COMPLIANCE, COMPLIANCE AND COMPLETE COMPLIANCE

It’s not always clear what landlords can do to ensure they are compliant. For instance, if you granted a tenancy before 2015, you probably didn’t serve the tenant with a gas safety notice before they moved in, as required by the regulations now. Tessa Shepperson of Landlord Law says that you can’t just serve the notice now and hope it will work; that’s what Caridon Properties did, in Caridon Properties vs Monty Schultz, and the court held that the subsequent Section 21 notice was still invalidated by failure to serve the notice at the start of the tenancy.

Sim Sekhon of Legal for Landlords suggests that in these circumstances, giving tenants a new AST and ensuring the gas safety notice, the How to Rent brochure and the EPC are delivered before the new tenancy is signed, might work. But you wouldn’t be able to serve a Section 21 notice in the first four months of the new tenancy – so if a tenant has already become a problem, you’d actually be prolonging the period during which they’re renting. There’s no definitive answer on these issues, as yet, and it could take two to three years for case law to emerge.

HMO HORRORS

That’s already tricky enough, but Paul Shamplina thinks it’s just a sideshow compared to the changes in HMO regulations. Previously, a property was required to be licensed as an HMO if it was let to five or more tenants from two different households, and it was more than three storeys high. Now, the three-storey qualification has been quietly removed, and he reckons that a staggering 170,000 properties could fall within the new HMO definition. If they don’t get licensed, landlords will be breaking the law – and they won’t be able to issue a valid Section 21 notice.

“Landlords and lettings agents may not know about, or might not act on, these changes,” he says, “and it might not make a big difference in the short run; if they go to court to evict a tenant, that’s when they’ll find out the bad news.”

EVICTIONS

Eviction imageEviction cases can already take a long time. Most landlords prefer Section 21 to Section 8, as, particularly where a case is not defended (for instance by the tenant claiming they didn’t receive the notice), it’s much faster. Paul Shamplina says that with Section 21, “If the paperwork is in order and it’s not being defended by the tenant, on average, a judge looks at it for one and a half to two minutes per case.”

One case has been ongoing for three years, twice adjourned by bizarre defences, costing the landlord £6-7,000 in legal costs. The message is “You need to get it right first time.

On the other hand, Section 8 requires time in court, which is taking an increasing long time to reserve. Although Section 8 (breach of tenancy) gives landlords the right to recover arrears and damages from the tenant, while Section 21 only allows the landlord to take possession of the property, most landlords still take the Section 21 route, since minimising voids is more likely to deliver returns than pursuing the arrears. That’s particularly the case where tenants don’t have much in the way of assets, unless there’s a guarantor.

If a case is defended, on the other hand, things can drag on; Sim Sekhon says, “We’ve got one case that’s been going on for three years, adjourned twice by bizarre defences, which has cost the landlord £6-7,000 in legal costs.” The message to landlords is very much that if you want a successful eviction, “You need to get it right first time,” he says – and that applies to the start of the tenancy as well as to eviction proceedings.

SECTION 21

October also brought the changes to Section 21. Previously, you could serve a Section 21 at the start of the tenancy period and keep it in reserve, to be invoked at any future date. Effectively, that put tenants under notice right from the start of the tenancy.

If the paperwork is in order and it’s not being defended by the tenant, on average, a judge looks at it for one and a half to two minutes per case. Paul Shamplina, Landlord Action.

Paul Shamplina imagePaul Shamplina says, “Sometimes we saw one that was three or four years old, and we asked to act on it.” That might have been within the letter of law but it was completely against the spirit of the law, which was meant to protect tenants from arbitrary eviction. Now, Section 21 becomes “use it or lose it”; possession proceedings must be started within six months of the issue of the notice, or it ceases to be effective.

However, Paul Shamplina says, there is some good news for landlords, too. While old style Section 21 notices had to be issued with precise timing, so that they ended on the last day of the regular rental period, the new forms simply serve two months notice – it doesn’t matter when it runs out. “That’s much more user-friendly,” he says.

Serving a Section 21 notice will, in future, require all landlords to be able to prove that they’ve served the required gas safety, EPC and How to Rent notices to the tenant.

You look after your tenants, they will look after your property. So, you get fewer problems, fewer void periods and fewer disputes. Richard Abbots, Inventory Hive.

Richard Abbots - Inventory Hive - imageRichard Abbots of Inventory Hive says that’s one reason why all the prescribed notices have been written into his software’s process – the tenant has to confirm receipt by email, and that email is kept as evidence that everything is in order, the legal paperwork as well as the inventory. Professionalism at the start of the tenancy is the only way to ensure the landlord’s freedom of action later, should problems arise.

INVENTORIES

Richard points out that often, inventories contain disputed items but because the tenant has other things to concentrate on when moving in, this doesn’t resurface till the end of the tenancy. At that point, the landlord makes a claim against the deposit for damage, and the tenant thereupon disputes the damage and says it was there all along. “With our software,” he explains, “we make the tenant engage with the inventory report at the time, and so these issues are dealt with there and then” – not in the form of an attended check-in (inefficient as a use of the agent’s time), but a simple emailed checklist. “If the inventory says the carpet’s clean, but the tenant logs a photo of a stain, then there’s a stain – the landlord can’t claim for that. But if there’s a huge burn in the carpet as well, the landlord can take that out of the deposit.”

Landlords need to commence the eviction process and say that when the rent is paid they will stop the process. But not before. The tenants are then incentivised to behave.

Now that the provisions on retaliatory evictions apply to all tenancies, landlords clearly have a vested interest in being able to prove that the property was in an adequate state of repair. Of course, that also helps ensure that tenants don’t have a valid counterclaim to possession proceedings; the landlord can show that all statutory maintenance and repair obligations have been complied with.

During the tenancy, Inventory Hive also helps landlords to maintain their properties – and prove that they’ve done so – by integrating with Fixflo software and providing checklists for regular visits. It’s a virtuous circle, Richard Abbots says; “You look after your tenants, they’ll look after your property. So, you get fewer problems, fewer void periods and fewer disputes.”

PREVENTIVE MAINTENANCE

Eviction boxes imageSim Sekhon is another believer in the power of preventive maintenance. He believes that it’s the low end properties, and landlords who cut corners, who will have issues – particularly with the retaliatory eviction provisions of the regulations, which bar landlords from serving a Section 21 notice within four months of a local council enforcement notice being served. Keeping properties well maintained should minimise complaints from tenants, and this will prevent claims of retaliatory eviction. Sekhon warns; “Disrepair cases can get really, really messy.”

Unfortunately, when it comes to evictions, many landlords and lettings agents make an already bad situation even worse. Sometimes, lettings agents let things drift before they give the landlord the bad news; sometimes landlords delay issuing a Section 21, hoping things will get better. Tessa Shepperson says that when a tenant has become a problem, “Ultimately the only real solution is eviction; it’s sad but true. If, for example the tenants are not paying rent, what they are in effect doing is negotiating a further rent free period. Landlords need to commence the eviction process and say when the rent is paid (or whatever), then they will stop the process. But not before. Then tenants are then incentivised to behave. Remember it takes up to six months or more to get a possession order.”

Sim Sekhon backs up the need to act speedily. “The average landlord who contacts our advice line has already got three months of arrears,” he says; they could have issued Section 21 the day the tenant hit two months of unpaid rent.

ESCALATING ISSUES

Sekhon also admits to getting at least one call a day where he thinks “Oh no, this is going to get difficult” because a landlord or agent has made things worse for themselves. He points to Ministry of Justice stats that show two-thirds of landlords who go to court on their own behalf have the case dismissed because the paperwork is wrong.

Worse than doing your own legal work, though, is taking the law into your own hands. There’s a fine line between diligently pursuing rent arrears and harassment. Sekhon says, “As soon as a landlord contacts us, we tell them to cut off all communications with the tenant”, just to make sure they don’t cross that line.

There can be problems serving notice, too. Just as with the gas safety and How to Rent notices, you need to have proof that Section 21 was properly served, as tenants saying they never received the notice is a common defence. It might not keep them in the property long term, but it will usually ensure the case is adjourned – costing the landlord money. Paul Shamplina advises hand delivering the notice, and taking a photograph including the day’s newspaper, or using a process server. “And make sure you get the right individual,” he says, “not just someone who popped in for a cup of tea.”

No wonder many landlords and agents are turning to outsourcing the process – Sim Sekhon estimates that only one in five are still serving their own notices and handling the evictions process in-house. It’s obviously much more efficient to let the specialists manage the process.

REAP AS YOU SOW

But perhaps the best way to deal with problem tenants is to stop them becoming problems at all. As Richard Abbots says, treating your tenants well generally pays dividends. More professionalism at all stages of the process – from signing tenants up and referencing onwards – won’t just help get rid of problem tenants; it will help stop tenants becoming a problem in the first place.

November 22, 2018

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