What The Queen’s Speech Means For Private Rented Sector Landlords
James Walters from Irwin Mitchell's Real Estate Disputes team reflects on this week's Queen's Speech.
One of my favourite lockdown TV programmes has been BBC One’s This Is My House. The premise of the show is that a homeowner needs to convince some celebrity judges that their house is, in fact, their house. The problem is that they have to compete against three other people (actors) claiming to be them and pretending that they are the real owner. It can be quite a challenging task for the real owner.
Landlords reading this week’s Queen’s speech may equally feel that convincing actual judges to return possession of their property will be more challenging in the years ahead.
While the reform of the Housing Act 1988 (“Act”) has been on the agenda for some time, the pandemic put those reforms on hold, with a number of temporary protections put in place to prevent or delay the eviction of tenants who may have been negatively affected by the pandemic. Her Majesty’s speech confirms the Government’s plan to publish details of reforms in Autumn 2021 for landlords, tenants and other interested parties to comment on.
Overview of recovering possession of PRS property
- Notices under Section 21 of the Act (“Section 21 Notice”) are one of the two main ways that that a landlord can recover possession of their properties. The landlord does not need to prove that the tenant has breached their tenancy to serve this notice, and the Section 21 notice procedure is often referred to as a “no fault” eviction process.
- Before March 2020 a landlord serving a Section 21 Notice needed to give not less than two months’ notice expiring on or after the last day of the fixed term of tenancy. However longer periods have been required since March 2020 when the Coronavirus Act 2020 came into force.
- The other main way to recover possession is a notice under Section 8 of the Housing Act 1988 (“Section 8 Notice”), but a landlord can only serve such a notice where one or more of the grounds in the Act are made out (which include the tenant being in rent arrears and other breaches of the tenancy agreement).
- Before March 2020 a landlord serving Section 8 Notice would need to give 2 weeks’ notice in the case of rent arrears (and longer periods in other cases), and the notice could be served either before or after the fixed term ends. However longer notice periods have been required since March 2020 when the Coronavirus Act 2020 came into force.
Key proposals from the Queen’s speech
There are two proposals from the speech and its briefing papers which will likely have an impact on landlords’ ability to recover possession of the PRS property.
We will … Publish our consultation response on reforming tenancy law to abolish Section 21 ‘no fault’ evictions and improve security for tenants in the private rented sector, as well as strengthening repossession grounds for landlords when they have valid cause.
In 2019 the Government consulted on the abolition of Section 21 Notices, and a number of stakeholders fed into that consultation. The above statement from the Government confirms that it will publish its response to the consultation and that it appears to remain committed to abolishing the use of Section 21 Notices.
We have some idea of what the reforms may look like from the Rented Homes Bill (“Bill”) which was published in 2019. The Bill proposed the abolition of both assured shorthold tenancies and Section 21 Notices. This would make assured tenancies the standard form of tenancy in England. Assured tenancies are more secure than assured shorthold tenancies, and can normally only be ended by the tenant leaving voluntarily or the service of a Section 8 Notice. The Bill also added several new grounds allowing landlords to recover possession using a Section 8 Notice where the tenant was not in breach of the tenancy agreement.
These new grounds included where a landlord or their family member intends to live in a property and where a landlord intends to sell a property. The Bill provides that a 2 month notice period would apply to the right for a landlord/their family member to live in the property. It does not say the notice period that would apply where a landlord intends to sell, but it is likely to be no less than two months.
Generally landlords’ groups opposed the reforms in the Bill, and wanted to retain Section 21 Notices. However the Queen’s speech and statements from the Government in the past year show a clear intent to abolish Section 21 Notices, and landlords should assume that this is going to happen in the near future.
The proposed reforms will have a number of impacts on landlords:
- There is no right to possession unless they can prove one or more of the grounds in the Act. The Bill suggests that the landlord will need to supply evidence (e.g. details of the proposed sale), and that this evidence may need to be tested at a court hearing. This may make the possessions process more complicated, risky and costly.
- The additional grounds may not cover all of the circumstances in which a landlord might want possession back. For example, if a landlord wished to agree short term lets which do not fall into one the exceptions in the Act (e.g. holiday accommodation) there is no clear ground in the Bill allowing the landlord to recover possession at the end of the fixed term where the tenant does not breach the terms of the agreement.
- It may result in longer tenancies of residential property. This has been the Government’s policy aim for many years. Longer tenancies may have some benefits for landlords, such as more secure rental income and fewer periods where properties are vacant. However where the landlord wants the return of the property for redevelopment, its own use or because of tenant default the process may be more difficult.
We will … Explore improvements and possible efficiencies to the possession process in the courts, to make it quicker and easier for landlords and tenants to use.
The Government has mentioned increasing the speed and efficiency of the possession process. As many landlords will be aware, the current system can be slow and cumbersome.
There are no details from the Government on how the current system would be improved or made more efficient, so watch this space. There is currently an accelerated procedure for possession claims based on a Section 21 Notice where no rent arrears are being claimed. In such cases there is no court hearing unless a tenant files a defence denying the landlord’s right to possession. If the landlord can show that proper notice was given a possession order can normally be made on paper, which is normally faster than the standard possession procedure. It may be that the Government plans to modify this procedure to allow landlords to obtain a possession order without a hearing, or at least to somehow fast-track the process.
Landlords should keep a close eye on announcements coming from Government, and participate in any further consultations to ensure that their views are heard. While it is likely that Section 21 Notices will be abolished, there may be scope to influence the new regime, particularly with respect to improving the efficiency and speed of the court process.
A slightly reduced version of this article first appeared on CoStar on 13 May 2021.