Change in the 'private rented sector

After years of being told that the government had no intention of introducing further regulations, ?the private rented sector has been hit by ?a succession of legislative changes, with ?more on the way. Why is this?

Three reasons are:

• The increasing importance of the private rented sector – in some areas the proportion of households living in private rented properties is believed to be in excess of 20 per cent;

• The scandals of poor housing and rogue landlords, exposed in particular by television programmes such as Nightmare Tenants, Slum Landlords; and

• The ever-increasing bill for housing benefit paid out by the government and a drive to get value for money.

Rather than just describing the new rules, I will ?be discussing them in the context of three main themes: increasing fragmentation (in particular ?the growing divergence of housing law in England and Wales), the increased use of section 21 of the Housing Act 1988 as a penalty, and the clampdown on rogue landlords. 

Increasing fragmentation

The Housing (Wales) Act 2014 is bringing mandatory licensing and accreditation to landlords and letting agents in Wales, and the Renting Homes (Wales) Bill will, when passed, introduce fundamental changes in the structure of tenancy law. This will drive a massive wedge between landlord and tenant law in England and in Wales. 

There is also the added complexity that, in England, assured shorthold tenancies (ASTs) created or renewed after 1 October 2015 will ?be subject to additional regulation under the Deregulation Act 2015 and the Assured Shorthold Tenancy Notices and Prescribed Requirements (England) Regulations 2015. 

Admittedly, this will end on 1 October 2018, ?after which time all ASTs will be subject to the new rules. However, before then, it will be necessary for advisers to check carefully when tenancies were created or renewed (e.g. by the tenant being given a new fixed term under a renewal form) before advice can be given. I can see this causing considerable confusion.

Use of section 21

Section 21 allows a landlord to evict tenants as ?of right (regardless of whether or not they have complied with their tenancy obligations) provided the proper procedure has been followed. 

This formerly consisted of serving a notice ?under section 21 and obtaining a court order for possession. Provided the notice contained all the elements required by section 21 and the notice period had expired, the judge was unable to refuse the landlord the order. 

The Housing Act 2004 then changed things by introducing prerequisites, so that landlords who had failed to comply with the tenancy deposit legislation and to obtain a licence to rent out the property as a house in multiple occupation could not use section 21 to evict tenants until these matters had been rectified.

Therefore, judges, when considering an application for possession, had to consider whether these matters had been dealt with correctly by landlords.

Many landlords failed to comply, in particular, with the tenancy deposit rules. As non-compliance usually caused them considerable expense (e.g. the inability to evict non-paying tenants), once landlords learned of this, they tended to take care to be compliant in future. In this respect the measure has been successful.

Things have now been carried further by the Deregulation Act 2015, which has introduced three more preconditions for landlords to comply with before they can use the section 21 procedure. ?Note that these only apply in England for new tenancies or renewals of existing tenancies which commence on or after 1 October 2015. 

The new rules require compliance with a modified version of certain existing obligations. ?At present these consist of the service of a gas safety certificate on tenants and the service of an energy performance certificate. Both requirements have been with us for some time. 

The regulations have also introduced a new requirement for landlords to serve the government’s ‘How to Rent’ booklet (confusingly described in the legislation as ‘prescribed information’) on tenants at the start of their tenancy. The booklet is only available in electronic form online, so will need ?to be printed out or (if the tenant consents) sent ?by email. 

This new requirement ensures that landlords can only use the no-fault section 21 grounds if tenants have been given at least some information about their legal rights – something that has to be good news for tenants.

The legislation provides for more prerequisites to be added by the secretary of state, but those are the ones which apply at the moment. No doubt others will come.

Rogue landlords

Apart from the section 21 penalties discussed above, there are two main ways in which the government is clamping down on rogue landlords.

The first, again introduced by the Deregulation Act 2015, is directed at the practice of ‘retaliatory eviction’. Retaliatory eviction is where a landlord uses section 21 to evict tenants who complain about the condition of the property instead of getting the work done. It is clear that there is a minority of landlords who regularly practice this – helped by the fact that rented property in many areas is in short supply and so their tenants, if they are evicted, may have nowhere else to go.

The new ‘anti-retaliatory’ regulations, which again only apply to new tenancies or renewals of existing tenancies which commence on or after ?1 October 2015, provide for landlords to be unable ?to use section 21 within six months after service ?on the landlord of one of three specified local authority notices, the most important of which is an improvement notice. Improvement notices are served where a property has been found to have a category one or two hazard after a housing health and safety rating system inspection has been carried out. 

If the tenant has previously complained about the property, any section 21 notice served after that complaint will also be invalid if the complaint is subsequently upheld by the local authority’s serving one of the three relevant notices.

The need for local authority support will prevent tenants raising false allegations in possession claims, as environmental health officers are unlikely to serve notices for anything other than serious disrepair or health and safety issues.

The only problem with all this is the ability ?of local authorities to carry out the inspections ?and deal with the necessary paperwork, as many local authorities are severely understaffed due ?to funding cuts. This problem may be resolved ?with the second method of dealing with rogue landlords – improved enforcement.

Comparatively few prosecutions are currently carried out by local authorities against rogue landlords. One reason for this is the low fines handed out by magistrates. Even a successful prosecution can be seen as unsatisfactory if landlords found guilty of serious unlawful ?eviction and harassment offences are merely fined a couple of hundred pounds (as often happens). 

However, this is to be addressed in the forthcoming Housing and Planning Bill, which looks set to bring in new penalties – with local authorities being entitled to retain the fines to finance further enforcement work.

The Bill will also (if it comes into law) extend ?the rights of tenants and (where rent is paid by housing benefit) local authorities to apply for rent repayment orders, and will set up a rogue landlord database. Local authorities will also be able to apply for banning orders against rogue landlords and letting agents, giving them considerably more ‘teeth’ in their enforcement work.

More complex system

The new rules are mostly welcome, as they are a serious attempt to deal with problems which have been dogging the private rented sector for years.

However, they come at the price of a considerably more complex legal system. The vast majority of landlords are ‘small landlords’ owning just one or two properties, who often are largely ignorant of their legal obligations. For example, many are still unaware of the tenancy deposit rules, even though these have been in force for over eight years. Inevitably, many will be completely ignorant of ?the new rules now in force.

As there is no obligation on letting agents to undergo regular training, many of these, too, will lack proper knowledge of the new rules.

In Wales, all landlords will shortly have to choose between undergoing training and accreditation or using an accredited letting agent. How long can the government put off introducing this in England? 

Tessa Shepperson is a lawyer and blogger on landlord and tenant law @TessaShepperson www.landlordlawblog.co.uk