English Draft Possession Reform Consultation Response

What is the consultation about?

Westminster is currently seeking responses to their consultation on removing the ability to create assured shorthold tenancies. This will effectively end the landlords right to serve a section 21 notice.

Recognising the frustrations landlords feel with grounds based possession, the consultation is seeking views on a wide range of reforms to section 8. This includes amending the mandatory rent arrears ground so that the tenant must be under a month in arrears by the time of the court hearing.

The RLA welcomes many of the proposed improvements to section 8. However, we believe that removing section 21 without the introduction of a specialist housing court and substantial tax and benefit reform risks many landlords fleeing the market.

What is the RLA doing about this consultation?

We recently undertook the largest ever non-governmental survey of landlords and agents in the private rented sector. The results made it clear that landlords are extremely concerned about the removal of section 21 with 98% of landlords considering leaving the market if it is removed.

It is vital to their business because, despite the myths around ‘no fault eviction’, landlords do not seek possession without a legitimate reason. Overwhelmingly they use section 21 notices to regain their property from tenants in rent arrears, or anti-social tenants who are damaging their property.

If section 21 must be removed, then more needs to be done to ensure landlords can confidently regain possession of their property where they have a legitimate reason to do so.

  • All the grounds landlords use must be significantly strengthened, especially those for anti-social behaviour, property damage or breach of tenancy.
  • There has to be a new improved housing court that is properly funded to end the 22 week delays in possession.
  • Consideration needs to be given as well to incentives to rent out properties to more vulnerable tenants such as benefit and tax reforms.

With all that in mind we have produced a draft consultation response to assist you with making your concerns known before the consultation close on 12th October 2019. It is reproduced below, or as a downloadable document to be printed out so you can respond to the consultation by the deadline.

Please, do not leave it to other landlords to respond. This is the biggest change to the PRS in 30 years and they may be leaving it to you.

Draft Consultation Response

Who we are

The Residential Landlords Association is the leading membership body for private landlords. It has over 35,000 members and a further 30,000 landlords who receive its updates and regularly view its website.

We recently performed the largest ever non-governmental survey of landlords.  Over 6000 respondents provided their feedback on questions relating to possession reform in the UK.  The findings from this research inform our responses to this consultation.

Question 1: Do you agree that the abolition of the assured shorthold regime (including the use of section 21 notices) should extend to all users of the Housing Act 1988?

No

If not, which users of the Housing Act 1988 should continue to be able to offer assured shorthold tenancies?

The RLA does not believe that the assured shorthold tenancy regime should be abolished at all and certainly not without a wide range of reforms being implemented first.

The Assured shorthold tenancy offers valuable flexibility and choice to tenants and landlords alike. In the Government’s recent consultation on longer term tenancies many tenants, particularly more mobile groups such as young professionals, prefer the flexibility of this arrangement. 

Without it, according to our research, almost all landlords will become more restrictive in who they let properties to.  Manchester Metropolitan University have also produced independent research that shows these restrictions will more than likely fall on the most vulnerable tenants.

This is only logical.  Landlords are more willing to take a chance on higher risk tenants if they have confidence they can regain possession of their property where they have a legitimate need to do so.  Without this confidence, the landlords that do not flee the market will look to choose tenants that are more likely to pay their rent every time.  As one of our members explained when responding to our survey “if section 21 were to go without a suitable alternative to get a property back quickly, then I would probably only rent to professional tenants because I can’t take the risk of not having the rent paid again, but not being able to recover my property easily”.

However, if the assured shorthold tenancy is to be removed then the RLA takes the view that local authority housing should not be able to offer flexibility and choice that the private rented sector cannot.  The Law Commission’s Final Report in 2006 specifically cautioned against restricting choice and flexibility within the private rented sector as this was the main benefit provided by the PRS in comparison to social housing. In many areas of the country, social housing is already at breaking point with demand far outstripping supply.  Making this sector more attractive risks pushing local authority resources beyond breaking point risks increasing homelessness significantly.

Instead, if the assured shorthold tenancy is to be removed, then it would be better to provide flexibility and choice to classifications of tenants rather than classifications of providers. Students or young professionals for example are groups that would value this flexibility and would be likely to choose such an option if it was available.  Similarly, landlords would be more likely to offer vulnerable tenants the chance to rent a property if they had the security provided by the assured shorthold tenancy.

Question 2: Do you think that fixed terms should have a minimum length?

In practice this already exists for most landlords and tenants and there is no need for a statutory minimum length.  Mortgage providers require a 6-12 month fixed term tenancy as standard in buy to let mortgage arrangements.  This provides all parties, including the tenant, with a fair tenancy length that offers security to tenant, lender and landlord alike.

The RLA suggests that this arrangement continue, with tenancy lengths being set as part of a contractual arrangement. 

Question 3: Would you support retaining the ability to include a break clause within a fixed-term tenancy?

The RLA supports the retention of flexibility and choice in contracts.  However, it is unlikely that landlords will use break clauses if these all of the proposed changes are implemented.  At present a break clause allows both parties to bring the tenancy to an end.  Without section 21 or specific grounds where a break clause may be applicable (such as ground 1 of Schedule 2) a break clause could only be used by a tenant.  As such, landlords would likely see no reason to incorporate these clauses in their agreements.

Question 4: Do you agree that a landlord should be able to gain possession if their family member wishes to use the property as their own home?

Yes

Question 5: Should there be a requirement for a landlord or family member to have previously lived at the property to serve a section 8 notice under ground 1?

No

Question 6: Currently, a landlord has to give a tenant prior notice (that is, at the beginning of the tenancy) that they may seek possession under ground 1, in order to use it. Should this requirement to give prior notice remain?

No

If not, why not?

Landlords would welcome the proposed change to ground 1 that allows relatives of the landlord to make a home in the landlord’s property. In our recent survey on possession reform we found that 84.9% of respondents agreed that this ground should exist.

This change would allow landlords to offer homes to family members in the event of unexpected changes in circumstance such as redundancy or unplanned pregnancy.  However, should a landlord need to regain possession in this manner then prior notice would be counter-productive. Our research shows that landlords do not seek possession without good reason.  In almost all cases this means the tenant is in rent arrears, (83.9%) or they are behaving antisocially (51%) or damaging the property (56.1%).  For a landlord to seek possession from a good tenant is unlikely unless the family need is great, and most likely unexpected as being able to plan ahead would ameliorate most housing issues.

Question 7: Should a landlord be able to gain possession of their property before the fixed-term period expires, if they or a family member want to move into it?

Yes

Question 8: Should a landlord be able to gain possession of their property within the first two years of the first agreement being signed, if they or a family member want to move into it?

Yes

A 2 year prohibition on the use of ground 1 is likely to negatively affect some groups.  In particular, thought needs to be given to members of the armed forces living in service family accommodation. They and their families are licensees that will usually be served a 93 day notice by the MOD in the event of medical discharge after their service to the country.

Many of these veterans will rent out their own properties while stationed abroad or in other areas of the country. They will obviously wish to return to their homes after this. Under the new proposals these members of the armed services would have to find alternative accommodation instead.  The RLA has spoken to armed forces veterans in regards to this issue and it is clear that they may face difficulties this accommodation. 

Primarily this is because they will be in receipt of Universal Credit which landlords are understandably wary of given the widely publicised issues with receiving with payments and rent arrears. The RLA has spoken to veterans groups and they have highlighted that many veterans who have been medically discharged struggle to find homes as a result of this.  They will likely continue to do so as long as Universal Credit claims do not offer direct payments and face extended delays in payments.

As a result, this will likely place a further strain on local authorities as they have a statutory duty to consider whether former armed forces personnel are vulnerable and entitled to homelessness support.

The RLA recommends that the 2 year prohibition on serving a notice under ground 1 not be implemented.  If it must be then there have to be safeguards put in place to protect groups like veterans who wish to return to their homes and may struggle to find alternative accommodation.  This needs to be explicitly laid out in law so that these veterans can confidently regain possession of their own home without the worries of facing an extended, uncertain battle through the courts.

Question 9: Should the courts be able to decide whether it is reasonable to lift the two year restriction on a landlord taking back a property, if they or a family member want to move in?

Yes

Question 10: This ground currently requires the landlord to provide the tenant with two months’ notice to move out of the property. Is this an appropriate amount of time?

Yes

Question 12: We propose that a landlord should have to provide their tenant with prior notice they may seek possession to sell, in order to use this new ground. Do you agree?

No

If no, please explain.

As in Question 6, there should be some accommodation for changes in the circumstances of the landlord.  A property may be profitable initially or the landlord may be capable of paying their mortgage.  However, changes to the tax burden on landlords or persistent rent arrears in other properties may change this situation. 

For example, landlords have been under an increasing tax burden with the changes to mortgage interest relief.  In many cases, due to the type of mortgage or the tenant’s income these changes mean that the property is now making a loss.  Sheffield Hallam’s independent research found that a number of homes with more vulnerable tenants would become loss making as a result of the MIR changes. In this situation without access to section 21, these landlords would be forced to continue making a loss on their investment, as they could not sell to people who wished to live in the property, and no sensible landlord would buy the property given the loss being made.

As such, while prior notice is reasonable to require, this should be able to start from a point after the tenancy has begun.  Should a landlord serve a notice that they intend to sell then this could trigger the waiting period before a notice can be served.  For example, if a tax change with a similar impact as MIR is introduced then the landlord could serve notice they intend to sell the property in the future.  After 1 year they would then have the right to serve this notice.

Alternatively, the RLA recommends looking at ways to make selling the property with tenants in situ an attractive option.  Confidence in the sector is fragile currently and growing worse. According to our research, removing section 21 risks 98.1% of landlords in the private rented sector leaving the market.  According to the English Housing Survey the private rented sector provides homes to around 4.7 million people. As such, if these changes must be implemented serious consideration needs to be given to how to ensure the sector continues to be an attractive investment opportunity. 

Our research asked what could be done to retain investment in the event section 21 is removed.  We found substantial support for a massively improved section 8 process, a new low cost housing court and a number of tax changes such as the restoration of mortgage interest relief, tax incentives for selling the property to the tenant or with them in situ.  The RLA believes that all of these measures should be in place and proven to be effective before the government risks losing the confidence of 98% of landlords in the private rented sector.

Question 13: Should the court be required to grant a possession order if the landlord can prove they intend to sell the property (therefore making the new ground ‘mandatory’)?

Yes

Question 14: Should a landlord be able to apply to the court if they wish to use this new ground to sell their property before two years from when the first agreement was signed?

Yes

Question 15: Is two months an appropriate amount of notice for a landlord to give a tenant, if they intend to use the new ground to sell their property?

Yes

Question 17: Should the ground under Schedule 2 concerned with rent arrears be revised so:
·      The landlord can serve a two week notice seeking possession once the tenant has accrued two months’ rent arrears.
·      The court must grant a possession order if the landlord can prove the tenant still has over one months’ arrears outstanding by the time of the hearing.
·      The court may use its discretion as to whether to grant a possession order if the arrears are under one month by this time.
·      The court must grant a possession order if the landlord can prove a pattern of behaviour that shows the tenant has built up arrears and paid these down on three previous occasions.
Please explain.

A number of the proposed changes are welcome. Many of our members have experienced the frustrations of tenants paying a fractional amount of their arrears so that the current ground 8 is no longer applicable.  As such, changing it so that the tenant must pay the majority of their arrears off before the hearing is a welcome one. Similarly we welcome the change that allows landlords to gain mandatory possession where they can show a persistent pattern of building up and paying down rent arrears.  However, the RLA has some concerns regarding the present wording, particularly as to how it will affect landlords of vulnerable tenants such as those on Housing Benefit.

Historically, many landlords and local authorities have taken rent 4-weekly where their tenants are in receipt of housing benefit.  Given the long standing cap on housing benefit these tenants are significantly more likely to be in arrears than tenants with a higher income.  Similarly, tenants who are employed in low income work are likely to be paid for their hourly rate rather than as part of their salary. This lends itself to weekly or 4-weekly payments.  Tescos for example, is one of the largest employers in the country and pays the majority of its staff on a 4-weekly basis. Landlords and tenants alike may wish to fix the contract to the same period to simplify the payments for everyone.  However, these tenants are also likely to fall into arrears as Universal Credit will assess them once a year based on receiving 2 payments in a month, seriously reducing their UC payment or in some cases forcing them to reapply for Universal Credit.

The present wording fails to take account of these type of tenancies as the tenant would have to miss 3 separate rent payments before this ground could be triggered.  As such the RLA recommends retaining the distinction in the current ground 8 where weekly and fortnightly payments require 8 weeks of arrears. 

In addition, explicit mention of 4-weekly payments should be made.  The present ground 8 fails to mention 4-weekly payments, as such it is arguable that no tenant on a 4-weekly rent may be served a notice using ground 8. This has been used as a defence in cases of serious rent arrears to prevent landlords regaining possession of their property even where the rent arrears were still substantial.

It is vital that if section 21 is removed this ground must be available to all landlords as it is overwhelmingly the main reason behind so called ‘no-fault’ possession.  In our survey 83.9% of section 21 users had served their notice on the basis of rent arrears, often allowing the tenant to remain in the property for months to give them the chance to start paying the rent again.  As one of our members stated to us, “with one tenant I was worried I was going to be unable to meet my own mortgage repayments because they were in rent arrears with me. I gave them a few months to try and sort things out, but then I desperately needed the property back. I just couldn’t afford to not receive any rent off them anymore”.

Question 18: Should the Government provide guidance on how stronger clauses in tenancy agreements could make it easier to evidence ground 12 in court?

Yes

Question 19: As a landlord, what sorts of tenant behaviour are you concerned with?

Nuisance (such as parties or loud music)

Vandalism (such as graffiti)

Environmental damage (such as littering or fly-tipping)

Uncontrolled animals

Drug farms

Pop-up brothels

Threats to neighbours, other tenants, the landlord or their representatives

Question 20: Have you ever used ground 7A in relation to a tenant’s anti-social behaviour?

Yes

Question 21: Do you think the current evidential threshold for ground 7A is effective in securing possession?

No

Please Explain

As part of their membership of the RLA, landlords receive phone support and advice.  Every year, thousands of members call the RLA for advice on dealing with anti-social tenants.  Many of them would love to be able to use ground 7a as these tenants are a blight on the locality.  However, most of them cannot as the evidence bar is set far too high.

This is especially true because communication by the police or local authority after serious criminal or anti-social behaviour is non-existent. Many of our respondents to the survey highlighted the issues around collecting evidence in this manner “as the Police and Local Authorities refuse to share information with you due to Data Protection limitations and neighbours are usually scared to attend court or provide statements due to possible reprisals.”

The end result is landlords are usually unable to find out the specifics of any case where conditions 1, 2, 3 or 5 may have occurred and so ground 7a is usually unavailable.

Where our landlords have successfully managed to use ground 7a it is because a closure order of 48 hours or more has been placed on the property.  In these cases it is relatively simple to evidence to the courts that serious anti-social behaviour has occurred and so landlords feel more comfortable using this ground.

It is little wonder then that landlords prefer to use section 21 in cases of anti-social behaviour.  The mandatory ground can only provide certainty if there is clear communication by the police or local authority where a condition has been met.

As part of their membership of the RLA, landlords receive phone support and advice.  Every year, thousands of members call the RLA for advice on dealing with anti-social tenants.  Many of them would love to be able to use ground 7a as these tenants are a blight on the locality.  However, most of them cannot as the evidence bar is far too high. This is especially true because communication by the police or local authority after serious criminal or anti-social behaviour is non-existent. Landlords are usually unable to find out the specifics of any case where conditions 1, 2, 3 or 5 may have occurred and so ground 7a is usually unavailable.

Where our landlords have successfully managed to use ground 7a it is because a closure order of 48 hours or more has been placed on the property.  In these cases it is relatively simple to evidence to the courts that serious anti-social behaviour has occurred and so landlords feel more comfortable using this ground.

 It is little wonder then that landlords prefer to use section 21 in cases of anti-social behaviour.  The mandatory ground can only provide certainty if there is clear communication by the police or local authority where a condition has been met.

Question 22: Have you ever used ground 14 in relation to a tenant’s anti-social behaviour?

Yes

Question 23: Do you think the current evidential threshold for ground 14 is effective in securing possession?

No

Please explain

Our research found that landlords were significantly more likely to use section 21 over section 8 for cases involving anti-social behaviour.  Where over 50% of landlords using section 21 had done so in part because of anti-social behaviour, only a third of section 8 users had done the same.  This should greatly concern everyone as anti-social tenants are unlikely to have suddenly become anti-social at the end of a tenancy.  Instead the lack of confidence in the current section 8 procedure is leading to unsatisfactory solutions. 

In our survey on possession reform we received 6000 responses from landlords and agents making this is the largest non-government survey ever performed of the private rented sector.  In it we had numerous responses from members

Potential witnesses to the behaviour such as other tenants or neighbours are unwilling to provide witness statements as they would then have to spend on average 22 weeks living near to the anti-social person. In particular, for any HMO it is no surprise that the good tenants would rather hand in their own notice than spend nearly 6 months living with the anti-social tenant they have provided a witness statement against.

For the landlord, the lack of certainty around possession means that they would rather wait until near the end of the tenancy before serving a section 21 notice. 

This is concerning but not surprising. Our research found that generally landlords have no confidence in the court system.  Nearly 80% of landlords expressed dissatisfaction with the court system, citing delays at every point in the system.  With a 22 week wait on average according to the MOJ’s own figures, it is little surprise that landlords do not want to risk the time and money on a discretionary ground with such a poor reputation.

Put simply, ground 14 is not fit for purpose at this time and needs to be greatly strengthened before landlords will have confidence they can successfully gain possession.  Until then anti-social tenants will continue to use it to blight the locality for as long as they continue to pay the rent.

Question 24: Should this new ground apply to all types of rented accommodation, including the private rented sector?
Question 25: Should a landlord be able to only evict a tenant who has perpetrated domestic abuse, rather than the whole household?
Question 26: In the event of an abusive partner threatening to terminate a tenancy, should additional provisions protect the victim’s tenancy rights?
Question 27: Should a victim of domestic abuse be able to end a tenancy without the consent of the abuser or to continue the tenancy without the abuser?

Yes

Please Explain

Domestic abuse is a serious issue and victims should be protected and allowed to live in their homes free from abusive partners.  However a number of concerns need to be addressed regarding this ground before it can be extended.

Firstly, all the concerns regarding the lengthy court procedure still apply to this ground.  Victims of domestic abuse often suffer for years out of fear of their attacker.  Adding nearly 6 months to this ordeal is completely unreasonable.  A new more efficient Housing Court needs to be put in place that allows domestic abuse survivors to take control of their lives and these cases must be fast tracked within it.

Secondly, there needs to be safeguards in place to allow them to continue to live in the property and not return to court shortly after for repossession hearings based on rent arrears. 

In controlling relationships where Universal Credit is paid to one party, the likelihood is that it will be paid in full to the male member of the couple rather than each receiving half of the payment.  Statistically where domestic abuse occurs, the male partner is more likely to be the abuser but also likely to be in receipt of the Universal Credit claim as it allows them to financially control and limit the domestic abuse sufferers options.  Universal Credit joint claims are only split in exceptional circumstances. Only 20 out of 85,000 households received split payments in 2018. This makes it extremely difficult for victims of domestic abuse to escape the relationship.

Worse, once they have taken the decision to leave their abusive partner, research by Women’s Aid and the Trade Union Congress found that it could take up to 10 weeks for a new claim to be processed so that they could be financially independent.  It is highly likely then that these tenants will end up heavily in debt while they wait for this to go through and then have to pay rent on a property that they likely no longer have the financial resources to pay for.

Should this ground be expanded it is vital that Universal Credit is reformed first.  Domestic abuse sufferers should automatically have their housing component paid directly to the landlord with little or no interruption in payments.  Similarly, where possession is sought on this ground then the rental amount paid to the couple should be guaranteed for the length of the tenancy.  This would allow domestic abuse survivors to have the security and confidence to rebuild their lives without worrying where the rent will come from.

Question 28: Would you support amending ground 13 to allow a landlord to gain possession where a tenant prevents them from maintaining legal safety standards?

Yes

Question 29: Which of the following could be disposed of without a hearing? (tick all that apply)

1 Prior notice has been given that the landlord, or a member of his family may wish to take the property as their own home.

2 Prior notice has been given that the mortgage lender may wish to repossess the property.

3 Prior notice has been given the property is occupied as a holiday let for a set period.

4 Prior notice has been given the property belongs to an educational establishment and let for a set period.

5 Prior notice has been given to a resident minister that the property may be required by another minister of religion.

7A The tenant has been convicted of a serious offence in or around the property, against someone living in or around the property, or against the landlord.

8 The tenant has significant rent arrears.

New The landlord wishes to sell the property

Question 30: Should ground 4 be widened to include any landlord who lets to students who attend an educational institution?

Yes

Question 31: Do you think that lettings below a certain length of time should be exempted from the new tenancy framework?

Yes

If yes, what is the minimum length of tenancy that the framework should apply to?

Tenancies of up to 3 months have been considered holiday lets in the past and this should continue to fall outside the scope of the assured tenancy regime. As most mortgage and insurance providers require a 6 month minimum term for a tenancy on a buy to let mortgage this would not be open to abuse but it would simplify and clarify the confusion around what constitutes a holiday let or a short term arrangement for work.  This would free up court resources should the landlord need to repossess their property

The minimum length of a tenancy is not the only type of tenancy that should fall outside the scope of the new tenancy regime however. ‘Rent to rent’ companies offer guaranteed rent to landlords which is an attractive proposition.  However, many of them do so without explaining how this subletting arrangement works or how the landlord can effectively end the arrangement.  In many cases this is because the rent to rent company does not know how to end it properly themselves. Worse, many landlords do not even know the tenant is subletting. The RLA’s advice centre receives numerous calls regarding this every year and in many cases the landlord only finds out the property has been sublet when they perform an inspection and find people they have never met in the property.  Often the property has also been poorly partitioned and overcrowded without informing the landlord either.

These arrangements, along with Airbnb style lettings can seriously endanger the landlords right to the property, particularly for leasehold properties.  Under the present tenancy regime it is still difficult to regain possession in these instances.  Should the freeholder demand the tenancy be brought to an end, the landlord may have to seek possession twice; first against the original ‘tenant’ and then against the subletters. Often, they do not even know the subletters names or how much rent they are supposed to be paying. Even using the simpler section 21 process, this can take up to a year to deal with through the courts, with the landlord potentially facing possession action from the freeholder for breach of their lease during this time.

Where the property has been partitioned without the landlord’s knowledge a licensable HMO may also have been created.  This already creates problems for landlords at the moment as a licence must have been applied for, or a temporary exemption sought, before a section 21 can be served. If this requirement is transferred over to the section 8 procedure then the right to a temporary exemption in the case of subletting without permission must be made an absolute one.

Question 36: Are there any other circumstances where the existing or proposed grounds for possession would not be an appropriate substitute for section 21?

Yes

If yes please explain

When the RLA performed the largest ever non-governmental survey of the PRS we asked the respondents what reasons they had for serving notice.

While the majority of the reasons are covered already by the existing or proposed grounds, a number of landlords highlighted issues around tenant subletting without permission.  These properties can be overcrowded, potentially HMOs or simply let on Airbnb without the landlords permission. 

While this is technically covered by ground 12 (breach of tenancy) greater prominence needs to be given to this issue. The growth of Airbnb and unwitting rent to rent arrangements leaves landlords in danger as subletting can be an absolute breach of their lease with the freeholder, but only a discretionary ground under section 8.  The RLA proposes that subletting without the landlord’s permission be made a mandatory ground for possession.  This should also apply to any sublet arrangements set up by the tenant.