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Section 21 and landlords – the latest update to the Tenancy (Reform) Bill

Wednesday 21 January 2015

The second reading of the Tenancy (Reform) Bill put forward by MP Sarah Teather, is scheduled to resume on 6th March at Westminster. If passed, the bill would mean landlords could no longer serve a Section 21 Notice To Quit as soon as a tenant had made a complaint about a property to them or a relevant local housing authority.
 

 


For most landlords it is undoubtedly a comfort to know they can regain possession of a property if a problem develops during a tenancy.

And although most do their best to remedy problems with their properties for tenants, reports of revenge evictions in the UK have led to a Private Member's Bill being lodged in Parliament which aims to put an end to the practice.

The bill comes after a study conducted by housing and homelessness charity Shelterfound that more than 200,000 people in England faced eviction last year because they asked a landlord to fix a problem in their home.

The second reading of the Tenancy (Reform) Bill put forward by MP Sarah Teather, is scheduled to resume on 6th March at Westminster.

If passed, the bill would mean landlords could no longer serve a Section 21 Notice To Quit as soon as a tenant had made a complaint about a property to them or a relevant local housing authority.

Instead, they would have to wait until the first four months of the tenancy had passed before serving a notice, which can take a court up to two months to process, but this also means the time period before an order can be brought would be capped at six months rather than at the end of the fixed tenancy period, as is currently the case.

How will the Section 21 legislation affect landlords and their tenants?

Under the Housing Act, 1988, a Section 21 notice can be served by a landlord on the first day of a fixed-term tenancy as long as they have entered the tenants' deposit into a tenancy deposit protection scheme. Landlords must also give two months' notice but cannot take possession of their property before the end of the fixed tenancy term agreed. They are not required to give grounds for their decision.

If a tenant is in breach of their contract, landlords can apply for a Section 8 notice under the same 1988 Act in order to regain possession, but must meet 17 specific grounds in order to qualify. Read our article for a detailed explanation of the difference between the Section 21 and Section 8 notice.

Clause 1, subsection (1), of the Tenancy (Reform) Bill proposes the following. It reads: "A section 21 notice may not be given in relation to an assured shorthold tenancy of a dwelling-house in England within six months beginning with the day of service of a relevant notice in relation to the dwelling-house."

This is intended to give a landlord a cooling-off period after receiving notice from a tenant regarding, for example, an improvement notice from a local authority.

Clause 1, subsection (4) of the bill also states that even if such a local authority order has not been served, a tenant is still protected from a Section 21 possession order if:

  • The relevant local housing authority has not decided whether to inspect the dwelling-house
  • An inspection is still pending
  • The local authority has conducted an inspection but has not decided whether to serve a notice

The good news for landlords is the Clause 1, subsection (1) amendment means the period of time before proceedings can be brought for a Section 21 notice is capped at six months, rather than at the end of the fixed term of tenancy as is currently the case.

However, Clause 4 states that a Section 21 notice cannot be served during the first four months of a tenancy.

The problem with this is that it can take between two-six months to regain possession if a tenant ignores a Section 21 possession order and a landlord is forced to pursue an eviction order with a bailiff. And so the bill could effectively extend the period of time a tenant could stay in a property before they were evicted.

Protection for landlords

The Tenancy (Reform) Bill acts to protect tenants from revenge evictions but it does safeguard landlords from bad tenants in some areas.

Clause 2 of the legislation sets out a number of exceptions to the protection it offers tenants when a Section 21 notice is served. They will be made in the following instances:

  • Where states of disrepair complained about are the fault of the tenant
  • When a court decides a tenant's complaint is without merit
  • If a landlord's property is 'genuinely' on the market for sale. The bill states a dwelling is not genuinely for sale if offered to a business partner or someone associated with a business partner
  • When the property is subject to a mortgage granted before the beginning of the tenancy

Industry commentators have criticised bullet point two, which is Clause 2(2) of the bill, for not defining how a complaint is perceived as having merit narrowly enough. And so, when deciding whether to grant Section 21 possession order, a judge may find in favour of a tenant if more narrow guidelines are unavailable.

Another criticism of the bill is, it is well-known among landlords that mortgage lenders cannot evict tenants when repossessing a property and this can affect a buy-to-let landlord's ability to remortgage.

So, bullet point four, or Clause 2(8), of the bill may result in a reduction of mortgage-lending for private-rented property and an increase in Section 21 notices served.

The second reading of the Housing (Reform) Bill is scheduled to resume on 6th March, 2015. We will be following its progress. Check the news section of the Simple Landlords website or follow us on social media for updates.

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