22 May 2019 | Comment | Article by Rebecca Rees

An end to ‘No Fault’ evictions – but what are they and what does it really mean?

In mid-April, landlords in England and Wales began to digest the implications of the government’s announcement that it planned to end “unfair evictions”. This was through the removal of the landlord’s right to pursue possession on the basis of a Section 21 notice. The press referred to this as the end of “no fault” evictions, although in fact many landlords will have served this notice when the tenant is at fault for reasons which we will explain below.

The announcement made by the Welsh First Minister on 13th April at the Welsh Labour conference was swiftly followed by an announcement, a few days later, that the Westminster Government planned to do the same in England.

In Wales, this comes at a time when landlords in both the social and private rented sectors are contemplating the implications of the Renting Homes (Wales) Act 2016. Although the Act is not yet in force, it does contain a right to possession of a property rented on a “standard contract”, by service of a notice in a similar manner to the Section 21 procedure. The Welsh Government has confirmed that the new review will take place before the Renting Homes (Wales) Act is implemented, so that the Act will be amended before it comes into force. It seems unlikely that it will become law before 2021.

 

What is Section 21?

Section 21 applies to any assured shorthold tenancy. This will be almost all tenancies in the private rented sector and a significant minority of social rented tenancies.

Where a landlord is able to serve a Section 21 notice, it does not need any reasons or grounds to do so. There are times when a notice cannot be served, which over recent years have become more significant. They differ in England and Wales.

In both countries, the notice may not be served to end the tenancy at any time before the end of a fixed term. Neither can it be served if the landlord is in breach of the deposit protection legislation or if the property is an HMO (house in multiple occupancy) and the landlord does not have the necessary licence.

In Wales, the landlord must have complied with the registration and licensing requirements of the Housing (Wales) Act 2014.

In England, it cannot be used if the council has served an improvement notice or an emergency remedial action notice (in an attempt to prevent retaliatory evictions although a largely unsuccessful one.) Neither can it be served if the landlord has failed to give the tenant the energy performance certificate (EPC), all gas safety certificates from the one before the tenant moves in, and a copy of the government’s “how to rent” guide. It also cannot be served if the tenancy is in its first four months. Lastly, from June it will not be possible to use Section 21 if the tenant has been asked to make a payment prohibited by the Tenant Fees Act.

A social landlord will also have to bear in mind the tenant’s human rights and the Equality Act 2010 when serving notice.

Aside from those restrictions, it can be used at any time and gives the landlord a guarantee that once its process is properly followed, he or she will recover the property. It can still take 5-6 months if the tenant refuses to leave following notice, as the landlord has to issue proceedings and secure eviction via the court bailiff.

Under the Renting Homes (Wales) Act, a landlord of a standard contract would be able to serve a notice under Section 173 to end it. If, however, the landlord has failed to supply a written statement, breached deposit requirements or if the court considers that the decision to serve the notice is an attempt to avoid repair obligations, then they would not be able to serve the notice.

 

Impact on the Private Rented sector

The impact of the change on the Private Rented Sector is potentially huge. At the moment, the only other route to possession – via a Section 8 notice on the basis of one of the grounds set out in schedule 2 of the Housing Act 1988 is a much longer and potentially much more expensive process with potentially uncertain results. There are a number of differences to the Section 21 procedure:

  • Unlike Section 21, it will always require a court hearing, and if the tenant attends the hearing and defends the claim (even on the thinnest of grounds) it is most likely to be more than one hearing. That hearing cannot take place within 28 days of the day when the tenant is served with papers, and the timing is dependent on court availability. According to the Ministry of Justice statistics, over the past year 21,486 accelerated possession claims (i.e. claims issued following a Section 21 notice) have been issued in England and Wales. Most of these claims will have been dealt with without a hearing. By contrast, many Section 8 claims involve multiple hearings. If the court system has to find resources for tens of thousands of additional hearings each year, it has the potential to stretch court resources and mean all cases take longer to be dealt with.
  • A landlord must be able to rely on one of the specified grounds in the Housing Act for possession and must (especially if challenged) submit evidence of that ground. By contrast, a landlord pursuing a Section 21 claim only has to demonstrate that the Section 21 notice was valid and was correctly served. The need to evidence the claim will inevitably lead to increased work for the landlord as well as increased court time. If the landlord feels the need to instruct a lawyer this will also mean increased cost.
  • Where the ground relied on is a discretionary one, and all of the grounds which relate to tenant “fault” are discretionary, the court must assess whether it is reasonable to order possession. That will take time and evidence, and once again further cost. The judge can also order that possession is suspended or postponed. It is only in the most serious cases that a court will evict a tenant outright.

It can be many months and take several hearings before possession is obtained, if at all.

For those reasons, if Section 21 is available to a landlord, it is usually the case that it is more effective to use it than to rely on one of the “fault” grounds and use the Section 8 procedure, even though the Section 8 procedure requires a much shorter notice period. So, a Section 21 notice will often be served where a tenant is at fault, most often through property damage or failing to pay the rent. In fact, a landlord will normally only want to recover possession where he or she is having difficulty with the tenant, unless he wants to use the property himself or be able to dispose of it.

The use of the term “no fault” evictions is therefore a misnomer. The tenant will often be at fault, but the landlord does not need to prove that to the court. Not having to do so means that the process is much more straightforward. Clearly, that creates a risk that a “bad” landlord will serve a notice for the wrong reasons. There is a difficult balance to be struck here and it is important not to inadvertently punish the good landlords for the misdeeds of the bad, meaning good landlords are saddled with bad tenants, whilst trying to ensure that tenants’ rights are protected.

 

Impact on the Social Rented sector

Local Authorities are currently unaffected as the Housing Act 1988 does not apply to them. They do, however, have the ability under the Housing Act 1985 to grant introductory tenancies or to apply to court to demote a secure tenancy. Those tenancies can be ended without the landlord needing to prove the grounds for possession or reasonableness at court, but this must follow an internal review of the decision and is subject to judicial review/human rights/Equality Act challenges. It remains to be seen whether these processes will remain unchanged, although there have been no indications that the Government intends to review them.

In Wales, however, local authorities will be in the same position as other social landlords under the Renting Homes (Wales) Act. As such, they would have been able to use Section 173 in circumstances where they were permitted to use standard tenancies, including the new equivalents of starter and demoted tenancies. Welsh local authorities will therefore be affected by the changes.

Under current law, there are a number of different circumstances in which a Registered Social Landlord (RSL) or Private Registered Provider (PRP) might use an assured shorthold tenancy. These include starter tenancies, demoted tenancies, intermediate rent properties as well as some landlords who operate private sector rentals. They can be used when housing a particular client group in supported accommodation where there may be a need to move on. They can also be used when housing the homeless where duty has been assessed, but permanent accommodation is not yet available. These circumstances are largely replicated in the Renting Homes (Wales) Act.

A social landlord seeking to use Section 21 in one of these contexts already has to be aware of and understand the occupants’ human rights and (where applicable) the Equality Act 2010 – both of which require them to consider carefully whether it is appropriate and proportionate to serve the notice. In practice, a social landlord is only likely to be using Section 21 either where the scheme is a specialist one and there is a good reason for moving the occupant on (in which case it is likely that new accommodation is available), or where the tenant is seriously in breach of the tenancy, and so at fault, in which case the process is already bounded by internal reviews and other safeguards.

The evidence shows that the use of Section 21 in the social rented sector is low – many landlords self-regulate by restricting the circumstances in which they will use it. Most use it only for anti-social behaviour cases. Whilst little used, it remains an option of last resort and one which means that evictions can be sought more quickly and cost effectively in serious cases. It is important not to overlook the interests of those affected by anti-social behaviour when considering these issues and so losing Section 21 altogether does have a significant impact for the sector.

Given the number of safeguards already in place is there reason to confine change to the Private sector?

 

The challenge for government

The Welsh Government has acknowledged the importance of the Private Rented Sector to housing supply in Wales. The Office for National Statistics (ONS) records that in 2017 176,000 households lived in privately rented property in Wales. This makes up around 13% of housing supply and is not far short of the 15% delivered by the social rented sector. Across the UK as a whole, the private rented sector equals the supply of the social rented sector at 4.5 million properties each. As such, the Welsh Government is mindful of the risk posed by making investment in housing unattractive.

This is also a time when there are increased efforts for the private sector to work more closely with the social rented sector in resolving housing supply challenges, recognising the importance of their role. The challenge will be finding the balance between the rights of the tenants, whilst ensuring that residential property remains a sound investment.

 

What does the future hold?

It seems inconceivable that Section 21 will be removed without a rewriting of Section 8, and its equivalent under Renting Homes. That means new and wider grounds for possession, some mandatory and some discretionary.

The Private Rented Tenancies (Scotland) Act 2016 lists 18 circumstances where a landlord can seek possession. This includes where the landlord intends to sell or refurbish or to use the property himself. Private landlords will want the assurance that they can recover the property if their plans change.

Perhaps it is time to consider how support services can be made more widely available in the private rented sector to help people manage and maintain their tenancy and avoid tenancy breaches.

There are further issues for the social rented sector. Will starter and demoted tenancies survive and if so in what form? What about housing for the homeless and supported housing, where assured shorthold tenancies are currently used? The grounds will need to be wide enough to ensure these types of properties are kept available for those needing them and not “bed blocked” by occupants who the landlord cannot move on, where appropriate to do so.

A review of the court process will be needed. The first hearing must currently take place within 8 weeks, but this time constraint doesn’t apply to second and subsequent hearings. Where cases become protracted they can take months, if not years to resolve. There will be a need to ensure there is a streamlined procedure to make sure landlords are not left seriously out of pocket by a slow court process.

That, of course, also means that court resources must be addressed. The Westminster Government’s press release in April confirmed that the court process is to be digitised and bailiff resources will be “freed up”. Additionally, consideration is being given to a dedicated and specialist housing court – which will be a very useful step forward.

Then there is the cost to both social and private landlords of the prospect of more possession claims taking more time to resolve. How is that to be minimised and who will end up bearing those costs?

These changes are so important for the whole rented sector – both private and social – that it is crucial the change is right, rather than quick. It is also important that the sector engages with the challenge.

 

For more information or advice get in touch with our Housing Management Department, where an experienced member of our team will be happy to assist with your query.

Disclaimer: The information on the Hugh James website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. If you would like to ensure the commentary reflects current legislation, case law or best practice, please contact the blog author.

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