The Renters (Reform) Bill introduced this week by the Government signals the long-awaited reform to existing housing legislation and the headline grabbing abolition of ‘no-fault’ Section 21 Notices. To fill the hole left by its removal, additional grounds for serving a notice of possession under Section 8 have been added, and some other existing Section 8 grounds have been extensively modified. We discuss some of the key changes, and what it will mean for landlords and tenants below.
Changes to the Section 8 Grounds
Section 8 Ground 1 currently allows a landlord to provide two months’ notice if they or their spouse/civil partner wished to move into the property. The new Ground 1 extends this to the Landlord’s co-habiting partner, parent, children/grandchildren, parents/grandparents, siblings and children of a cohabiting partner; or children or grandchildren of any of the above. The tenancy being terminated must have been in existence for at least six months to rely on this ground. Crucially, the landlord is no longer required to have lived in the property before the tenancy started for the ground to apply. This does seem to leave it open to rogue landlords to engineer a relative to move in the property in order to remove a tenant. The Government has considered this in the Bill, as the landlord is prohibited from marketing the property for letting for three months after expiry of the Ground 1 Section 8 Notice, but it appears that they are free to let the property after that. The Bill provides that the landlord could be fined or prosecuted in this scenario. However, this is only if someone reports the breach, which could be unlikely, given that the outgoing tenant will realistically be the only party to know this might have happened (after they vacate).
A new Section 8 Ground 1A has been introduced, allowing a landlord to serve two months’ notice where the landlord intends to sell the property. Again, the tenancy must have existed for at least six months. The addition of this ground represents a key concession to landlords, as selling a tenanted property is currently one the main reasons landlords wish to regain possession. As with the proposed new Ground 1, the landlord is prohibited from letting the property for three months after expiry of the notice relying on Ground 1A Section 8 Notice, but again we see potential for rogue landlords to avoid fines and prosecution if their conduct is not reported.
Section 8 Ground 2 allows mortgagees to serve notice in order to dispose of the property with vacant possession. Currently this ground only applies to mortgages granted prior to the start of the relevant tenancy. However, the Bill amends this ground to all mortgages, whether or not granted before the start of the tenancy. This is a major boost to mortgagees. However, sub-tenants of mortgaged properties will be less secure under the new proposals.
Ground 8 is currently the most heavily relied on ground for landlords trying to regain possession using Section 8 and provides for a two-week notice period. It applies where the tenant is two months in arrears of rent at the date of the Section 8 Notice and the date of a possession hearing. In the Bill, the notice period has been extended to 4 weeks. Also, any outstanding Universal Credit payments the tenant is due to receive are not to be included when calculating the arrears, if the Universal Credit payment would reduce the arrears below the two-month threshold.
A new Section 8 Ground 8A has been proposed in the Bill, which provides for a 4-week notice period where the tenant has been persistently in 2 months’ arrears or more. The trigger for Ground 8A is where a tenant falls into at least 2 months’ arrears, for at least a day, on at least three separate occasions. ‘Three separate occasions’ applies if in between those occasions, the amount of the arrears is reduced to less than 2 months’ for at least one day. If the tenant were to fall into more than two months’ arrears, on only one or two occasions, Ground 8A will not apply, but the landlord could still rely on Ground 8 (and the discretionary rent grounds).
This new ground is clearly aimed at dealing with a perceived loophole in the current legislation, in which Ground 8 cannot be relied on by a landlord where a tenant brings the arrears below the 2-month threshold (even by £1) before, or on the day of, the possession hearing. If Ground 8A is successfully relied on, the landlord will have a right to a mandatory possession order, regardless of whether the tenant clears the arrears. Landlords will want to ensure they have robust systems that monitor tenant payments, and which can identify persistent late payers of rent during a tenancy.
Another of the most widely publicised aspects of the Bill is the suggestion that it greatly expands powers for landlords to evict tenants owing to anti-social behaviour. These powers seem to mainly consist of changes to Section 8 Ground 14. Ground 14 currently allows a landlord to immediately bring proceedings following service of a Section 8 Notice where the tenant is guilty of conduct ‘causing or likely to cause’ a nuisance or annoyance to the landlord or others. The wording ‘likely to cause’ has been replaced with ‘capable of causing’. This, in theory, expands what conduct can fall within this ground, as the landlord will only have to show that the tenant’s conduct is ‘capable’ of causing nuisance or annoyance, not that it is likely to do so.
We think this is unlikely to change the effect of Ground 14 in practice. Ground 14 is discretionary, which means that a Judge has to consider whether it is reasonable to make a possession order, even if the tenant is guilty of the conduct alleged. A trivial transgression by the tenant may be enough to trigger Ground 14, on the basis that it is capable of causing a nuisance or annoyance. However, it is very unlikely that the Court would consider such trivial conduct to justify a possession order.
Prerequisites to possession
Almost all of the existing preconditions required for a Section 21 Notice (including service of an EPC, gas safety certificate and How to Rent Guide) will not be a bar to a Section 8 claim, which is good news for landlords (although fines will still apply for non-compliance, where applicable). However, landlords should take note that the requirement that deposits be registered, and the deposit prescribed information be given will be a prerequisite to obtaining any possession order (unless the deposit is first returned to the tenant). This contrasts with the current requirements, whereby a Section 21 Notice is deemed to be invalid if the deposit requirements are not complied with at the time of service of the notice. Under the new regime, it appears that the landlord can comply with the deposit requirements at any time before the possession order is made, in order to succeed in a Section 8 claim (although they will still be liable for compensation to the tenant if they failed to comply with the deposit requirements within the 30-day deadline).
While much attention has focused on the abolition of the ‘no-fault’ Section 21 procedure, the effect of this may turn out to be overstated. ‘No-fault’ is often equated with ‘no reason’. The vast majority of competent landlords will have a legitimate reason for serving a Section 21 Notice, and those reasons appear to be covered by the extended Section 8 Grounds. We also note that some of the proposed new Section 8 Grounds, are in fact no-fault, including Grounds 1 and 1A, so ‘no-fault’ evictions will continue under the expanded Section 8 procedure.
In our view, the relevance of the abolition of Section 21 is that it now protects tenants from eviction without being given a reason, and the Court determining that the reason is a legal one. This is a welcome change.
It is worth mentioning that until the legislation is passed, Section 21 continues to exist. The Bill is in draft form and may be amended or revised as it moves through the legislative process in Parliament. If and when the Act is passed, there is likely to be a lengthy transitional period to allow landlords and tenants to become familiar with the new provisions, so Section 21 is still likely to be with us for some while yet.
How we can help
For further information contact Paul Henson, George Cohen and Glenn Rhodes in Irwin Mitchell’s Real Estate Disputes Team.