Farmers brace for end of section 21 no-fault evictions

Section 21

Farmers are concerned about the impact on rural life that the government’s initiative, “A new deal for renting: resetting the balance of rights and responsibilities between landlords and tenants” could mean for rural landlords?

Writing for
FarmingUK.com, Charlotte Brackley and Gemma Richards, of Barlow
Robbins LLP analyse the impact that the change could have, and they
give some sage advice to farming and landlords in general.

The government
announced in April this year that it would bring an end to the
eviction process, the Shorthold Tenancy set in Section 21 of the
Housing Act 1988 – the so called “no-fault” evictions for
tenants.

The consultation
process ran through the autumn and has now closed. Whilst we await
the outcome of the consultation, there is much speculation as to what
will be the practical changes that all residential landlords must
face up to.

What one must
remember is that this policy change, and the consultation process
that follows it, was started under a previous regime, not under the
current incumbents, and certainly not under the likely new government
we get after the December 12 election. These things could change?

In the meantime this
article tackles the issues that may be pertinent should this change
come about under in present direction of travel.

Farmers and
residential landlords in general will need to review their strategies
for their rental properties in the light of these potential changes
and here Charlotte Brackley and Gemma Richards provide some useful
information and some ‘do’s’ and ‘don’ts’ for those who want to be
prepared of any eventuality.

As it is now

Section 21 of the
Housing Act 1988, and the Shorthold Tenancy as it stands, has
provisions for landlords regaining possession of a rented residential
property.

Providing the
original contracted term is ended, under S21, a landlord can serve
the tenant/s with a two-month notice to leave, pending the landlord
obtaining a possession order signed by a judge.

Providing all the
landlord’s paperwork is in order, and all the necessary
pre-requites have been complied with, a possession order can be
issued without a court hearing. Once a possession order has been
obtained, court bailiffs can lawfully evict the tenant/s.

The process can take
up to 9 months in total, though 6 to 10 weeks would be the norm, so
this is not a matter of landlords throwing tenants out on the street,
as some of the popular media stories would have us believe.

However, popular
opinion is such that the government of the day back in the spring of
this year was convinced that radical change was needed. Encouraged by
pressure for homelessness charities, strong signals from opposition
parties, and perhaps (cynically) the need for votes from a growing
cohort of tenants, and the government acted.

The flexibility
extended to landlords with Section 21 meant that landlords could let
their properties with confidence, safe in the knowledge that if
things went wrong they could always regain possession of their
property with the least amount of fuss. They can plan their letting
periods, refurbish the properties, reallocate them, redevelop and
sell them – within the terms of their letting contracts – as and when
they needed to.

But the very
flexibility that the process extends to landlords comes up against
the insecure position it places tenants in. Not all tenants want long
term security, but many actually do, especially if they have families
and children in local schools.

Most landlords want
tenants to stay long-term, especially if they pay rent on time and
look after the property, but some don’t. That’s the problem, and
usually it’s the minorities in each case that spoilt the party.

The proposed
changes

The government is
proposing to end the concept of the shorthold tenancy which has been
the mainstay of the de-regulated housing market since the 1988
Housing Act.

The idea is to swing
back the “balance” in power in the residential lettings market,
from the landlord having the choice, within the rules, as to when a
tenancy is terminated, and to giving tenants more stability and
security.

In such a regime,
with Section 21 gone, landlords would have to fall back on the
existing Section 8 procedure. This is a county court process where
the landlord must, in order to obtain a possession order and secure
any eviction, provide evidence that a breach of contract has
occurred.

These cases are
often not straightforward; determined tenants can throw up all sorts
of objections, and because court time is limited for any one hearing,
these cases can be drawn out for months. This is not even taking into
account losses that landlords are often experiencing because of lost
rent while all this goes on. Plus, legal costs can run into
thousands.

Section 8,
Housing Act 1988.

The Country
Landowener’s Association’s (CLA) Andrew Shirley commented that
this proposed new regime would be a “sledgehammer to crack a nut”.
The article points out that there’s a difference between urban and
rural residential lettings markets, where in the latter tenants are
already more likely to stay in one place for longer.

Shirley states that:

“The reality is
that in rural areas the average residential tenancy exceeds eight
years, compared with the urban figure of less than three, and tenants
in the countryside enjoy a higher level of satisfaction and a greater
sense of community”.

The government has
indicated that the Section 8 procedure would be enhanced with more
grounds for possession, enabling landlords more flexibility to take
back possession of residential properties in limited circumstances.
In particular, where landlords can show they want to sell the
property. But so far there’s been no mention of how the courts
could be made to cope with the extra workload involved – they are
already over stretched.

What would this
change mean for landlords?

Charlotte Brackley
and Gemma Richards, of Barlow Robbins LLP respond:

• Unless a tenant
  is in breach of the terms of their tenancy, a residential landlord
  will not be able to recover possession.
• Residential
  tenancies will become secure and landlords will have to think
  carefully before entering into new tenancies.
• What is certain
  is that landlords will no longer be able to rely on Section 21 to
  guarantee vacant possession on sale and to manage out problem
  tenants.
• Landlords will
  need to start thinking now if they will want to reorganise the
  occupation of cottages on a farm or estate to accommodate, for
  example, family members, beneficiaries and employees in the short to
  medium term.
• It remains to
  be seen whether expansion of the Section 8 eviction procedure will
  offer sufficient flexibility to landlords.
• The government
  hopes that one of the resulting changes will be a more stable rental
  market which landlords will want to invest in.

The Central
Association of Agricultural Valuers has said that with the additional
Stamp Duty Land Tax (SDLT) payable when purchasing a second home, a
buy-to-let, and all the other red tape that goes with letting, they
believe that the proposals could lead to rural properties being left
empty and sold for owner occupation.

It also believes
there could be a major shift from letting under Assured Shorthold
Tenancies (ASTs) to short-term holiday lets for landlords to avoid
being stuck with tenancies that they cannot terminate and tenants
that they might not want long-term.

The Association use
Scotland as an example, where similar new regulations where brought
into force in 2017, and already with the removal of no-fault
evictions fewer properties are now available for rentals.

What does this
mean for agricultural tenants with sub-let cottages?

It is common
practice for agricultural tenants (farm business tenancies) to
sub-let the residential properties on their holdings.

But given the
removal of the Section 21 safeguard, unless a sub-tenant is in breach
of the terms of their tenancy, it will be impossible for an
agricultural tenant to guarantee vacant possession of a sub-let
cottage at the end of their own tenancy. In such a case, if vacant
possession cannot be given, a tenant may be liable to the farm owner
/ landlord in compensation.

Barlow Robbins
LLP ‘s Dos and Don’ts for rural landlords

Do

• Review each
existing tenancy and identify those where a Section 21 Notice could
be served if necessary

• Carefully
consider the strategy for your residential portfolio, now and for the
next generation (for example, if you have good tenants, a guaranteed
income stream and no voids may be to your advantage now, but may not
fit with future development plans)

• Talk to
agricultural tenants about their sub-lettings so that these can be
managed, particularly where the agricultural tenancy will come to an
end in a few years’ time

• keep an eye
on the press so that you know when any new legislation is to come
into force and the expiry of any transition period (which might be
your last chance to use the Section 21 Notice)

Don’t

• Fail to use
the Section 21 Notice (if necessary) before it disappears

• Take on any
new tenants without vetting them carefully, as you could be stuck
with them indefinitely.

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