05/06/2023
Introduction
As outlined in our article introducing the Renters (Reform) Bill, the Government are proposing to make significant and sweeping changes to existing residential tenancy law. Perhaps the most eye catching and hotly anticipated of those promised changes is the commitment to abolish section 21 Housing Act 1988 (“section 21”) evictions, moving towards a “simpler tenancy structure”.
The purpose of this article is to shine a spotlight, and to consider in further detail, those headline changes proposed by the Government.
Changes proposed by the Bill: Tenancy Reforms
The Government’s intention, as to structural changes to the nature of tenancies, is to create one single system of periodic tenancies. This will therefore mean that assured shorthold tenancies will no longer be granted by landlords and tenants will move to periodic fully assured tenancies. Fixed term assured tenancies will become a thing of the past, particular once transitional arrangements to new periodic tenancies come in to place.
At present, there is a blended system of both fixed term and periodic tenancies:
- Fixed term tenancies commit both the landlord and tenant to a property for an agreed period; usually six to 12 months. After this initial period the tenancy will become periodic (unless ended, or further fixed term agreed); rolling on a monthly basis. A landlord may only deploy grounds for possession pursuant to section 21 grounds for eviction following the end of the initial fixed period.
- Alternatively, an assured tenancy can be created on a periodic basis from the beginning, with the landlord able to end that tenancy with two months’ notice under a section 21 eviction notice. The tenant will usually be able to end the tenancy with only one month’s notice.
The new tenancy structure regime will be achieved through the following sections of the Bill:
- Section 1: This abolishes fixed term assured tenancies, whilst also providing the formula for re-calculating rental amounts where old tenancies possessed rent periods in excess of 28 days; effectively implementing the monthly periodic nature into all relevant tenancies.
- Section 2: This provides for the omission of Chapter 2 of Part 1 of the 1988 Act (covering both assured shorthold tenancies (ASTs) and section 21 eviction), as well omitting the potential for a tenancy to be demoted to an AST as a result of antisocial behaviour from a tenant.
The result of Sections 1 and 2 of the Bill will mean that all new assured tenancies will be periodic, with a period of the tenancy not being in excess of one month, from the start of the tenancy, with a means of eventually converting all applicable pre-reform tenancies into assured periodic tenancies. It is hoped that the function of this new structural system will be to provide both tenants and landlords with greater flexibility to adapt to changes in their personal circumstances.
Schedule 1 of the Housing Act 1988 shall be further amended to add fixed term tenancies of more than seven years to the list of tenancies which are excluded from the assured tenancy system, a significant change for the shared ownership sector.
It will also put an end to the contentious ability of a landlord to use Section 8 grounds to obtain possession of a shared ownership long lease.
Implementation
These new structural changes are proposed to be implemented in a two stage process under section 67(2) of the Bill. Immediately following the new Act’s commencement date (implemented by accompanying regulations), the new regime will apply to every new assured tenancy that is entered into on or after that date. After initial implementation, an “extended application date” will then be set that will apply the new regime to tenancies that were created before, and continue through, that date.
Changes Proposed by the Bill: Abolition of evictions pursuant to s21 Housing Act 1988
The Government says that it has considered evidence set out (at the white paper stage) for the case for change suggesting that the prospect of section 21 notices led some tenants to feel “reluctant to challenge poor standards due to the risk of eviction without reason.” They also conclude that “short notice moves which can occur because of section 21 have negative effects on outcomes and reduce investment in local communities”.
Whilst a landlord, assuming the Bill passes, will be prevented from evicting a tenant by serving a section 21 notice, the Government has promised to support landlords by ensuring they will “remain confident that they can regain their property where they need to”.
In reality this means that Schedule 2 of Housing Act 1988 shall be amended so that there is an expanded list of mandatory and discretionary Grounds upon which a landlord can base an application for possession under section 8 Housing Act 1988, as covered in our articles covering the new grounds for possession.
The current proposals in the Bill for the abolition of evictions under section 21 carry across some of the safeguards for tenants facing eviction, which have developed over recent years to encourage landlords to ensure minimum safety standards for tenants, but there are also obvious gaps where the safeguards have not been carried across.
For example, a landlord who fails to properly protect a tenant’s deposit under a Tenancy Deposit Scheme is currently prevented from recovering possession under section 21. Tenants will therefore be encouraged to see that there are new proposed sanctions under section 215 Housing Act 2004 which will prevent landlords (except where relying upon Ground 7A or 14), from recovering possession where a tenancy deposit is not properly protected or not returned or where the relevant tenancy was created before 6 April 2007.
What appears to be missing in the Bill however are the requirements on a landlord to serve an EPC, ‘how to rent guide’ and Gas Safety Certificates at the outset of a tenancy, which had become requirements to enable a landlord to recover possession under section 21. The evolving case law in this area in recent years has represented a not insignificant obstacle to landlords seeking to recover possession under section 21 and it is interesting to see that these points are not currently re-provisioned with the Bill, given that they are important safety issues for tenants.
Comment
The abolition of section 21 has long been anticipated and will not come as a serious shock to landlords or those representing them. It is encouraging, but again unsurprising, to see provision has been made for an expanded list of Grounds in Schedule 2 Housing Act 1988 to support landlords seeking to manage their stock.
Landlords will clearly no longer be able to take advantage of the quick and cost effective accelerated possession route and we would expect to see additional pressures being placed on the court system in dealing with first possession hearings.
So what’s next?
This is the first stage in the Bill’s journey. We think it is not unlikely that further amendments will be made to require landlords to have served EPCs and Gas Safety Certificates before pursuing possession proceedings in all but the most serious of cases and we will watching closely as the Bill moves through Parliament.
If you wish to discuss this further, please contact Kate Hicks, Senior Associate or Steve Eccles, Partner.
This article was co-written by Rupert Simpson, Solicitor.
If you’ve missed any of the Spotlights in this series, you can find them here:
Spotlight on: an overview of the Bill
Spotlight on: New grounds for possession
Spotlight on: Supported and Temporary Accommodation
Spotlight on: rent controls, tenant redress, regulation of landlords…and pets
