15. April 2019
RED alert - Spring 2019 – 2 von 7 Insights
The Government has announced plans for a hugely important consultation into ending no-fault evictions for private residential tenancies. After years of pressure from groups backing the interests of "generation rent", the consultation looks set to pave the way for open ended residential tenancies, of the sort found more commonly across the continent.
While this is just a consultation, it seems unlikely that the Government will ever be able to put this genie back in the bottle. Indeed, the timing of the announcement, coming so soon after months of deadlock over Brexit, suggests that this is the Conservatives' play to win back young voters disillusioned with the political path Britain finds itself on.
However, as ever with new legislation, the devil will be with the detail, particularly when it comes to reviewing rents and securing possession from tenants under the new rules.
Under the current rules, a landlord does not need to provide a reason for taking back a property at the end of the contractual term of the tenancy, provided that it complies with basic regulations and serves two months' notice on the tenant, known as a "Section 21 Notice".
If notice is not served and the tenant remains in possession after the contractual term has ended, the tenancy becomes a statutory periodic tenancy, usually rolling from month to month. Again, a Section 21 Notice giving two months' notice can be served to bring a periodic tenancy to an end without a reason.
First and foremost, Housing Minister James Brokenshire has made it clear that the new laws will not include provisions for rents to be controlled. He describes this as the key point of difference between the Conservatives and Labour, as both parties now favour an end to no-fault evictions.
Prior to Section 21 being enacted, residential tenants enjoyed very strong security of tenure rights, as well as controlled rents. Many landlords will recall that under the Rent Act 1977, tenants had the right to pay a "fair rent", determined by a local rent officer. Some Rent Act tenancies survive today and "fair rents" are generally well below full market value.
While most tenants would happily see such measures reintroduced, the Government argues that this would lead to a fall in housing supply, as the incentive to rent property would likely be reduced.
So what is to stop landlords "hiking up" the rent to force people out? There is no current answer to this question from the Government and this is likely to be the key focus of the consultation.
If the point is to be regulated, one option would be the imposition of standard form rent review machinery into each tenancy, requiring that the rent be reviewed on an open market basis at designated intervals. Commercial rents are usually reviewed on this basis, but in the absence of a fixed formula, there would inevitably be scope for disputes.
It would also be important for the Government to ensure that the provisions did not lead to unintended consequences. All properties are unique to some extent and standard form rent review provisions have not been implemented in the commercial sector.
A ban on no-fault evictions is not a ban on all evictions and the Government has promised a more efficient procedure for evicting tenants who breach the terms of their tenancies. However, given that the reasons for evicting tenants must be backed by evidence, it seems doubtful that the Government will be able to provide meaningful change.
To challenge evidence properly, you surely need a hearing before a Court or Tribunal, and tenants will likely enjoy a degree of latitude from the Judges, given the potentially draconian consequences of losing their homes.
While one should not remain overly sceptical, successive Governments have had decades to improve the existing fault based system, yet experienced landlords know that they are often better waiting for the opportunity to serve a Section 21 Notice, in order to avoid the expense and uncertainty of going to Court to use the fault based procedure.
Aside from fault based evictions, it is also expected that landlords will have the right to obtain possession if they wish to live in the property themselves or if they want to sell the property.
However, as we know from our experiences with security of tenure for business tenants, proving an intention to use a property yourself is not entirely straight forward and even in clear cut cases, tenants are still able to exploit delays at Court to stay in possession for longer.
The Government is unlikely to row back from this decision and we will all find out more when the consultation ends. We are yet to learn the timeframe for the consultation but this is expected soon and we will keep you updated.
15. April 2019
von Stephen Burke
15. April 2019
von Stephen Burke