Government Consultation on Tenancy Reforms

In June, we reported here on the Government announcement in April 2019 to repeal section 21 of the Housing Act 1988, thereby abolishing "no fault evictions", and its plans to strengthen the Section 8 eviction process.

On 21 July 2019, the Government opened up a 12 week consultation seeking views on how to implement the Government's decision. The consultation ends on 12 October 2019 and is open to everyone, further details including how to take part can be found here

The Government is seeking to re-balance the rights and responsibilities between tenants and landlords in an effort to reinstate fairness and transparency in the private rental sector. The private rental market is now the second largest housing tenure in England, housing approximately 19% of the country's households.

The consultation confirms that the government proposes to remove the Assured Shorthold Tenancy ("AST") regime entirely.

The consultation is seeking views on:

• How Section 21 of the Housing Act 1988 has been used in the past
• The circumstances in which landlords should be able to regain possession once Section 21 has been abolished
• The changes that may be necessary to the existing grounds for possession in Schedule 2 of the Housing Act 1988
• The possible implications of abolishing AST's altogether
• Whether the Court processes for obtaining repossession orders could be improved
• Whether the proposed reforms should be extended to other types of landlords such as housing associations or the build to rent sector.

For tenants…

Following an earlier Government consultation, it was found that tenants felt Section 21 made them feel vulnerable as their tenancy could be ended at short-notice. As a means of improving stability and security for tenants, landlords will no longer be able to remove tenants without statutory grounds to do so (see below). The Government is of the view that abolishing AST's altogether will address the imbalance of power.

The default position, following reform, is likely to be that a tenancy is a periodic assured tenancy, unless the landlord is able to agree a fixed term in writing with the tenant. Under the current assured tenancy, a landlord cannot evict a tenant unless the landlord can demonstrate grounds (under Schedule 2 of the Housing Act 1988), or where the landlord and tenant have an agreed break clause. The Government therefore also seeks to underpin the abolition of Section 21 as a means to end a tenancy by enhancing the Section 8 grounds. It asks whether there should be a minimum length for a fixed-term assured tenancy and seeks views on the use of break clauses.

For Landlords…

Whilst the abolishment of "no-fault" evictions may appear to have tipped the scales heavily in favour of tenants, the Government is also minded to provide landlords with new grounds for possession, in addition to the grounds currently covered by Schedule 2 of the Housing Act 1988. The additional new grounds are:

• Where they need the property for occupation by a family member (extending the existing ground which relates to occupation by the landlord themselves);
• Where they need to sell the property;
• Where a tenant prevents landlords from maintaining legal safety standards at the property.

They also seek to review and reform existing grounds, such as those relating to rent arrears and anti-social behaviour. It will be crucial that the reasons a landlord can gain possession are clear and understood by both landlord and tenant before a tenancy agreement is signed.

Landlords often use Section 21 notices to end tenancies because it provides for an accelerated possession. The case can be decided without a hearing, in writing. The Government is reviewing how accelerated possession can take place when a claim for possession has been made following the issue of a Section 8 notice. Almost half of the landlords who responded to the Government's earlier consultations said they had experienced difficulties in gaining possession through the Courts, and the Government is now hoping to streamline the process in these reforms. Interestingly, the Courts and Tribunal Service Possession Reform Project will introduce a new online system to speed-up and simplify the Court process for landlords.

What's next?

Once the consultation closes, we can expect draft legislation which will put the reforms into effect. The Government will commence the new law six months after it receives Royal Assent. There will be a transition period in which landlords and tenants can continue to enter into AST's. The new law will not apply retrospectively and so landlords can continue to end existing AST's by using a section 21 notice.

The reforms have faced some criticism from landlords and associations who believe the moves could lead to indefinite tenancies and an even more arduous process to regain possession of their property. If this is the case, landlords may become reluctant to let out their properties and thereby reduce the supply of private lettings. The Government is at pains to stress that where Section 21 notices were used to regain possession of property in the past, landlords will now be able to end the tenancy by issuing a Section 8 notice provided one of the new or improved grounds in Schedule 2 applies.

Either way, it is good news for tenants as the reforms mean a greater degree of certainty and stability - from not disrupting their children's education when having to move out of a rented property, to saving costs associated with frequent moves which can often undermine people's ability to save for a deposit.

The effects of the reforms will be far reaching, and both landlords and tenants would be advised to have their say whilst the Government is listening.