ASTs, section 21 notices and the Deregulation Act 2015 – the longstop approaches

Jack Dillon discusses what the reforms in the Deregulation Act mean for landlords and tenants in England in view of the upcoming longstop date on 1 October 2018.

Introduction

Landlords and property lawyers may think that the Deregulation Act 2015 (DA 2015) is misnamed. The reforms for terminating assured shorthold tenancies (ASTs) are hardly “deregulatory”. Prior to the DA 2015, it was really only the rules regarding deposits that caused headaches when serving notices under section 21 (section 21 notices) of the Housing Act 1988 (HA 1988). At least deposits arose directly under the ASTs that were being terminated.

Since the entry into force of the DA 2015 on 1 October 2015, however, a far more extensive checklist has to be ticked off prior to serving a section 21 notice. Landlords have had to deal with wider concerns and could be forgiven for questioning whether the reforms achieved the “reduction of burdens resulting from legislation for businesses or other organisations or for individuals”, heralded by the preamble to the DA 2015. The prospect of recovering
possession has been used, in one sense, to “privatise” enforcement of certain regulatory and other matters.

The reforms introduced by the DA 2015, put briefly, mean for AST landlords in England:

• Changes to the required content and timing of section 21 notices.
• A retaliatory eviction defence.
• The need to provide:
  • gas safety certificates (GSCs);
  • energy performance certificates (EPCs); and
  • the government’s How to rent leaflet.

Landlords, agents and lawyers all need to be aware of these changes; mistakes are unlikely to be quickly, easily or cheaply remedied. It may feel to some property lawyers that these changes are well established. In one sense, they are. But, so far, and until 1 October 2018, the changes have only affected ASTs granted when the DA 2015 was in force (new ASTs), under section 41(1). Old ASTs that continued periodically after a fixed term were not affected. Landlords went, or ought to have gone, into these ASTs, if not the property investment itself, with their eyes open.

But the DA 2015 also included a three-year longstop, under section 41(3), after which the reforms will bite on every AST ever granted. The difference is that a landlord who granted an old AST, before the DA 2015 reforms were ever even considered, now cannot regain possession without complying. This is likely to cause some landlords problems that they would not have faced before the longstop. They’ve had, in fairness, three years to prepare.

Serving section 21 notices

Form 6A – Notice seeking possession of a property let on an Assured Shorthold Tenancy (form 6A) was introduced by section 37 of the DA 2015, inserting a new section 21(7) into the HA 1988 and the Assured Shorthold Tenancy Notices and Prescribed Requirements (England) Regulations 2015 (SI 2015/1646) (2015 Regulations) as amended. It should, now, be fairly well known; it will probably be the most familiar of the reforms.

In many ways, the form 6A template makes things simpler than before the DA 2015. Prior to the longstop, landlords have been permitted to use it even for old ASTs. Arguably, that was best practice. One of the few (or only) good reasons not to use form 6A would be to avoid having unnecessarily to comply with the DA 2015 reforms when seeking to terminate old ASTs.

Timing of section 21 notices has also been reformed. They cannot be validly served in the first four months of an AST being granted, not including tenancies arising under section 5(2) of the HA 1988 or replacement tenancies (see section 21(7) of the HA 1988). This restriction has, obviously, no effect for old ASTs. And section 21 notices also now expire; landlords must use (or lose) the section 21 notice by beginning proceedings no later than six months from giving notice.

Finally, landlords should also recall that the requirement to state a date for possession on the last day of a period of the tenancy has now been lifted by section 35 for section 21(4) notices. This is a relatively minor point following the Court of Appeal’s decision in Spencer v Taylor [2013] EWCA Civ 1600.

Retaliatory Eviction

The retaliatory eviction reforms, under sections 33-34 of the DA 2015, can render section 21 notices defective where a landlord has been served with a “relevant notice”, that is improvement notices served under section 11, 12 or 4(7) of the Housing Act 2004. After receiving a relevant notice, a landlord cannot serve a valid section 21 notice for a six month “lock out”. A relevant notice can also sometimes retrospectively invalidate a subsequently served section 21 notice. It is well worth practitioners being familiar with the exceptions under section 34 of the DA 2015.

Whether or not these types of defences are being run, and if so, successfully, in practice is not clear. Westlaw, for example, only notes one case in its analysis of section 33, decided on the basis that the AST started prior to 1 October 2015. This no doubt would be decided differently for a section 21 notice served after 1 October 2018.

Even under old ASTs, landlords would generally, one hopes, take a relevant notice seriously. But from 1 October 2018, all landlords, whether the AST is new or old, will also need to take seriously any complaint capable of falling into section 33, that is a “complaint in writing to the landlord regarding the condition of the dwelling-house at the time of the complaint.”

Looking at it from a wider (perhaps optimistic) angle, the changes may encourage less responsible landlords towards dealing with issues concerning the fabric of the property proactively, away from treating these issues reactively.

Other requirements

Since 1 October 2015, landlords have not been able to serve valid section 21 notices for new tenancies without first serving an EPC, a GSC and How to rent.

EPCs and GSCs are not new, though it would seem a safe bet that the DA 2015 has meant more landlords have obtained these than before. The effect of not providing an EPC or GSC is provided for by section 38 of the DA 2015 (inserting new section 21A into the HA 1988), together with regulation 2 of the 2015 Regulations, and for completeness regulation 6(5) of the Energy Performance of Buildings (England and Wales) Regulations 2012 (SI 2012/3118) or regulation 36(6) or (7) of the Gas Safety (Installation and Use) Regulations 1998 (SI 1998/2451). In a sense, there’s no harm in this – tenants ought to be able to know the gas safety and energy performance of the properties they rent – although there’s scope for the unscrupulous tenant to cause difficulties.

A copy of How to rent must also be served, under section 39 of the DA 2015 (inserting new section 21B into the HA 1988) and regulation 3 of the 2015 Regulations. How to rent did not exist before the DA 2015. After 1 October 2018, tenants cannot be evicted by a section 21 notice without being provided with a copy. The DA 2015 gives no deadline for serving How to rent, and so the important point, for landlords, is for How to rent to be served prior to any section 21 notice.

How to rent has not been without difficulty. Questions, for example, have arisen regarding which of the numerous iterations of How to rent ought to be served and at which point. The only sensible advice is to serve the version in force at the outset of the AST and every version issued thereafter.

Another question is what, exactly, is How to rent supposed to achieve? A considerable part of the leaflet deals with issues that arise prior to the taking of a tenancy. So, a landlord’s responsibilities before evicting their tenant extend to providing advice about finding a new property to rent. Is that really deregulatory?

More seriously, is How to rent a practical substitute for a legal aid regime and an effective County Court system that allows tenants to defend possession claims effectively?

Summary

It would be no surprise to see a raft of section 21 notices being served enthusiastically over the next two weeks before the longstop by landlords anticipating difficulties under the DA 2015 reforms.

In the future, we should expect to see “fault-based” notices under section 8 of the HA 1988 being served to end ASTs in similar circumstances and the trickier areas of the DA 2015 reforms to be litigated.

This article was first published on Practical Law’s Property Litigation Blog.