Abolition of no-fault evictions

Landlords will be more selective in choosing tenants and the supply of rental property may fall as a result of proposed reforms, says Laura Southgate

The controversial Renters’ Reform Bill was announced by government in the Queen’s Speech on 19 December 2019. The bill is to abolish ‘no fault evictions’ in respect of residential property, a measure which is intended to help address the widely reported housing crisis in the UK and to protect tenants in the residential rental market.

Under the existing law, a landlord is able to recover possession of a property which is let under an assured shorthold tenancy at the end of the contractual term by serving two months’ notice pursuant to section 21 of the Housing Act 1988. No reason has to be given for the service of the notice; nor is it reliant on any breach on the part of the tenant.

In addition, a landlord can recover possession by serving notice pursuant to section 8 of the Act on the basis of one or more of a number of statutory grounds set out in Schedule 2 to the Act. In doing so, a landlord has to give reasons for the need to recover possession. The onus falls on the landlord to prove the ground. 

The most commonly used grounds relate to some form of default on the part of the tenant such as rent arrears, breach of the tenancy or anti-social behaviour. Many of the grounds are discretionary, meaning that the court does not have to make an order for possession, even where it is satisfied that the ground has been made out.

Fairness

The briefing paper which accompanies the Queen’s Speech states that the purpose of the bill is to “introduce a package of reforms to deliver a fairer and more effective rental market” by removing section 21 and “giving landlords more rights to recover possession through the courts where there is a legitimate need for them to do so by reforming current legislation”.

It is assumed (but this has not yet been confirmed) that the reforms will come in the form of widening the statutory grounds for possession under section 8 of the Act. For example, it is anticipated that a new ground will be added to cover a situation where a landlord intends to sell a property with vacant possession.

In our experience, landlords tend to use section 21 notices sparingly, relying on them to recover possession generally only to address defaulting tenants. A real concern about the abolition of the section 21 notice is the difficulties that landlords already face when recovering possession under section 8. 

In respect of the discretionary grounds, which apply to anti-social behaviour and breaches of the tenancy agreement (among other things), as the court does not have to make an order for possession, landlords cannot be certain on the outcome; and it will effectively come down to the decision of the particular judge on the day. 

Even if a possession order is made, significant time will almost certainly have been lost; and often, only fixed costs are awarded to the landlord – leaving a significant shortfall. 

Perhaps even more critical is the already widely criticised court process for obtaining possession orders, which many believe is no longer fit for purpose. Latest figures suggest that London landlords face the longest waits, as it takes on average 30 weeks for a court to issue a possession order after a landlord files a claim. 

That is not the end of the problem: once a possession order has been made, if the tenant does not vacate the premises, a warrant for eviction must be issued in order for the county court bailiff to carry out an eviction. This could take several more months. A survey by the Residential Landlords Association found that where respondents used the courts to seek possession, 79 per cent were dissatisfied – with delays reported at every stage of the process.

The briefing paper to the bill promises to “work to improve the court process for landlords to make it quicker and easier for them to get their property back sooner”. The reforms will inevitably increase the number of applications made to court for possession orders and the number of hearings required, putting even more of a burden on the already overstretched resources. 

However, it is not clear whether any improvements will be made before the new legislation comes into force. If not, there is a fear that the delays will only get worse in the interim. 

Fall in supply

Against that background, it is foreseeable that landlords might be deterred from renting out their properties altogether, or indeed may be enticed by the short-term holiday let market which carries with it potential tax benefits and less regulation than longer term tenancies. 

Even if landlords do choose to persist with longer term tenancies, there is the risk that void periods will increase as landlords will have to wait until a property is vacant before looking to find another tenant, given the uncertainty of both the outcome and the timeframe for obtaining possession through the court. 

Landlords are also likely to be much more selective when choosing their tenants and, therefore, some tenants could find it hard to secure rental accommodation. All of this could mean that the supply of rented accommodation will actually fall, which in turn will lead to higher rents – defeating the object of the bill.

As yet, there is no date for the second reading of the bill in parliament. Indeed, when a written parliamentary question was put recently to the Ministry of Housing, Communities and Local Government requesting a time frame for the proposed legislation, the response was that the bill would be introduced to parliament “as soon as parliamentary time allows”, suggesting that it is not necessarily as high on the government agenda as many had feared. 

That said, it does seem to be a question of when, rather than if, the reforms will be implemented and there are measures that landlords can take now to prepare. For example, standard tenancy agreements can be reviewed to ensure that tenant covenants are as comprehensive and clear as possible.

Landlords are also well advised to ensure that their arrears reporting and credit control systems are effective, so that arrears are addressed at an early stage. 

The importance of keeping good records of any breaches or anti-social behaviour should also be reinforced, so that there is reliable, contemporaneous evidence should a landlord need to resort to possession proceedings. 

The devil will certainly be in the detail. We await further details of the bill and the proposals for improvements to the court process with anticipation.  

Laura Southgate is a property disputes partner at Cripps Pemberton Greenish crippspg.co.uk