Landlord and tenant update

The Housing Act 1988 was passed after ?a decade of previous legislation that had driven landlords from the private rented sector (PRS). Its effects are still felt today, but in its attempt to reverse the trend, it has brought ?a new set of challenges.

The Act in the main, deals with three areas of regulation in the PRS: rent control, security of tenure and succession rights. But first a quick look at what had gone before.

Workers' homes

Regulation in the PRS really began in the First World War as the government of the day wanted to protect the homes of workers needed for the war effort. Various changes then took place over the years until they were codified in the Rent Act 1977 by the then-Labour government.

As you may remember, the Rent Act was very strong on tenants' rights. It is still with us today for tenancies which commenced before 15 January 1989 (a dwindling but still substantial number). Tenants within the scope of the 1977 Act are known as 'protected tenants'.

So far as rent control is concerned, protected tenants have the right to request a 'fair rent' to be set, and this is then the only rent the landlord can charge. It is supposed to be based on market rent, but up until the 1990s there were no, or very few, true market rents around. So the value of the 'fair rents' drifted lower and lower, to the intense frustration of landlords.

Even if a fair rent was never registered, landlords were required by section 51 of the Act to a statement in rent-increase deeds 'in characters not less conspicuous than those used in any other part of the agreement' saying that tenants' security of tenure would not be affected if they did not sign the agreement and that they could still apply for a fair rent.

Otherwise the increase was invalid. I have known landlords get caught out by this and bring a rent arrears claim only to find that actually they owe the tenant money.

In addition, once a property was let, it was exceedingly difficult to get it back again. After the contractual tenancy, tenants were entitled to a protected 'periodic tenancy' which could only be ended by providing 'suitable alternative accommodation' or by one of the 'cases' in ?schedule 15 of the Act. As few of these were mandatory, it became difficult to evict even tenants who were in arrears of rent.

Even after tenants died, their spouse and ?family members had the right to stay on under similar terms. Not surprisingly, the PRS shrank dramatically, from about 80 per cent of households in 1918 to about 9 per cent in the late 1980s. This ?is not entirely due to the Rent Act but it played ?a big part.

When Margaret Thatcher came to power in a wave of popularity in 1979, she was determined to restore the PRS. The result (after a bit of tinkering in the 1980 Housing Act) was the system we have today: assured and assured shorthold tenancies (AST) under the 1988 Housing Act. Let's see how this affected our three areas of regulation.

Rent control

This was more or less removed, apart from the right for tenants to challenge rent in the first six months of an AST (rarely used in practice) and the right to challenge a notice to increase the rent under section 13.

However, as landlords and tenants can now agree rent between themselves rather than via rent officers, most rent is now set in the tenancy agreement, rather than increased via notice.

Security of tenure

It is also now much easier for landlords to get their property back. Not only do we have a mandatory rent arrears ground in schedule 2 (ground 8), we also have the 'no fault' notice only shorthold ground in section 21.

This allows any landlord of an AST to recover possession as of right after the fixed term has ended, provided a notice complying with the provisions of section 21 has been served on the tenant and both the notice period and the fixed term of the tenancy have expired.

Succession rights

Succession rights are limited, and only spouses of tenants of assured periodic tenancies who were not themselves a successor tenant will succeed. Landlords can, however, end this using ground 7 and (if the tenancy is an AST) under section 21.

New landscape

It is fair to say that the Housing Act 1988 has changed the PRS landscape completely. This did not happen immediately. Up until February 1997 when the amendments in the 1996 Landlord & Tenant Act came into force, the default tenancy type was the assured tenancy, where landlords did not have the benefit of section 21.

The housing market was also depressed due to the housing crash (which started in 1988), and did not really take off until after the development of the buy-to-let mortgage in the mid 1990s.

Since then, the PRS has developed apace and now comprises some 16.5 per cent of all households. This is good. Under the Rent Act 1977 it became increasingly difficult for anyone to find short-term accommodation, for example when changing jobs, which was not good for the economy. However, we now have other problems.

Problems with section 21

These are the opposite of those which developed under the old Rent Act. Then the problem was ?lack of flexibility. Now things are maybe a bit ?too flexible.

The problem is section 21, arguably the most influential clause in the whole of the current housing legislation. It has allowed the PRS to grow, safe in the knowledge that they can recover their property if not quickly, at least with certainty if they follow the proper procedure.

However, this in itself has led to abuses. Landlords (or their agents) are able to say at the end of the fixed term 'If you do not agree to this rent increase I will enforce the section 21 notice we have served and evict you'. Few tenants are willing to call their landlord's bluff and rent levels are rising '“ particularly in London.

Another, more sinister child of section 21 is retaliatory eviction. This is where a landlord uses section 21 to evict tenants (or 'troublemakers') who dare to ask for essential repair work to be done. Again, there is not much tenants can do about this. It also makes enforcing the statutory repairing covenants almost impossible in many cases.

The third problem, which is again largely down to section 21, is the lack of long-term security of tenure for those who want it. Landlords, contrary ?to popular culture, are not all money-grabbing millionaires. Most have heavy commitments. If tenants fail to pay, they are faced with a long period without rent while they go through long-winded processes needed to evict ?tenants through the courts.

Although the Housing Act 1988 does have a mandatory eviction ground for serious rent arrears, this is not as easy and straightforward as using section 21, where they can also use the more straightforward (if inappropriately named) accelerated procedure.

This can also be used for other 'bad tenant' issues such as persistent underpayment of rent, anti-social behaviour and failure to maintain the property. All of these could be difficult, long-winded and expensive claims using the more traditional discretionary grounds

It is therefore very much not in a landlord's best interests to grant a fixed term for anything longer than six months, or a year at most. Section 21 can only be used after the fixed term has ended.

So, under the old system we had stagnation ?and few new rented properties coming onto the market. Under the new system we have volatility and the inability of families to put down roots ?due to the risk that they may be 'moved on' after ?six months.

Landlord's market

The real problem today, however, is not inadequacies in the law but the massive undersupply of suitable properties for people ?to live in, which makes it very much a landlord's market. Although many tenants do not want ?to be 'tied down', there is a need for greater ?security of tenure, for example for families ?and older people.

However, I do not believe that this is going to happen unless landlords are given a quicker ?and more straightforward way to evict genuine bad and non-paying tenants. It is simply too ?risky for them.

The current housing problems would undoubtedly be less acute if there were enough houses, and local authorities were better equipped to deal with criminal landlords. Most landlords just want good long-term tenants with no 'voids' and it is a fact that most tenancies are ended by tenants rather than landlords.

However, it does not look at the moment as if anything is going to happen any time soon (in England anyway, there are plans for radical changes in Wales).

The Housing Act passed in 1988 did what it was supposed to and kick-started the PRS, albeit after some delay. Twenty-five years later, we have different problems.

However, it is difficult to see how changes in the regulatory system can do much to solve problems which are essentially down to a lack of housing.

There is scope for useful reform to allow greater security to those that want it, but this needs to be coupled with reform of the eviction procedure. ?We may then be set for a further 25 years. SJ