Draft Consultation Response to ‘Increasing the minimum notice period for a no fault eviction’ in Wales.

The Welsh Government are currently seeking responses to their consultation on increasing the notice period for serving a Section 173 notice. This notice will replace the Section 21 when the Renting Homes Wales Act comes into force.

The consultation is asking for opinions on increasing the notice period from 2 months to 6 months, prohibiting landlords and agents from serving a notice until at least 6 months has passed, whether to restrict service if the notice is not acted upon, and whether to remove break clauses.

It also looks at transplanting over the current English requirements to serve a gas safety certificate and EPC at the start of the tenancy if landlords wish to be able to serve a Section 173 notice.

What is the RLA doing about this consultation?

The RLA has produced a draft consultation response to assist you in providing answers to key concerns over these proposed changes. It is reproduced below or it is available as a download for printing.

In it we argue that contrary to the ‘no fault eviction’ myth, landlords are forced to seek possession because of poor tenant behaviour. The failures of the court system and grounds based possession are well documented and landlords need confidence they can regain possession in a timely fashion. Unfortunately, nothing in this consultation looks to improve either the courts or the grounds based possession route.

If these changes are implemented without significant court reform and improvements to the grounds for possession many landlords will flee the market entirely.

What can I do?

We need your help to raise awareness of the serious impact of these changes for landlords and tenants alike, so please campaign with us and let’s make renting better.

You can voice your concerns by responding to the consultation directly by September 5th 2019.

You can also contact your Assembly Member directly regarding this.

We would also like to hear from you on what you would like to see included in our final response. When you do respond to the consultation please email policy@rla.org.uk with your own response.

Draft consultation response

Your experience of the current eviction process
Question 1: Have you issued a Section 21 notice in the last two years?

Yes

Question 2: If yes please tell us why

The RLA’s advice service aids tens of thousands of landlords a year on a broad range of topics including possession cases. When landlords are forced to seek possession, overwhelmingly the reasons given are that the tenant is in rent arrears and/or the tenant is engaging in anti-social or criminal behaviour.

Our research arm, Pearl, recently undertook the largest ever non-governmental survey of private sector landlords and agents.  Over 6000 landlords and agents responded from across the United Kingdom to put forward their experiences of using the Section 21 process.  Of the respondents to this 96.1% stated that Section 21 was important to them. This corroborates the independent research performed by Manchester Metropolitan University on homelessness reduction.

The survey found that 83% of landlords cited rent arrears as the reason for serving a Section 21 notice with property damage and anti-social behaviour also being cited for over half of landlords.  Over a quarter of respondents had also served a Section 21 notice at the tenant’s request so they could be prioritised for social housing.  In short, contrary to the myth of the ‘no fault eviction’, landlords have very good reasons to serve a Section 21 notice; reasons that will not disappear if these changes are implemented.

Question 3: Please tell us if you have taken possession of a property using another procedure

Our research found that the majority of landlords have never sought possession via the courts, with tenancies ending naturally as tenants decide to move on.  Where our respondents were forced to use the court system, they were five times more likely to use Section 21 instead of Section 8, even where they had access to grounds for possession. 

As with the landlord experience of Section 21, the overwhelming majority of landlords using Section 8 had done so primarily on the basis of rent arrears (96.8%). Property damage (42.9%) and anti-social behaviour (33.8%) were also significant reasons for seeking possession. It is clear then that there is little evidence of ‘no fault’ evictions.    

Question 4: Please tell us of any challenges you faced in taking possession of the property.

Respondents to the RLA research identified numerous significant challenges in regaining possession of their property, particularly where they used Section 8 as the route. 

The current grounds for possession are not fit for purpose and it is far too difficult to regain possession where the tenant is being anti-social or damaging the property.  Neighbours and other tenants do not feel comfortable providing witness statements.  Anti-social tenants may live next to them for months afterwards or in many cases possession may not be granted at all.  It is no wonder most landlords prefer the certainty of Section 21. 

Nearly 80% of landlords were dissatisfied with the existing court system. They cited excessive delays at every stage of the possession process from processing applications to enforcement of judgements. Worst of all, even after a judge has established the landlords right to their property, over 30% of landlords faced extended delays waiting for a bailiff to enforce this. 

In most cases these delays will include a tenant who is continuing to accrue rent arrears.  According to Homelets monthly rents in Wales are typically £637 a month.  If a landlord faced the average wait of 22 weeks (MOJ) from applying to court to regaining possession, this would equate to £3234 in additional rent arrears that in most cases can never be recovered. This is clearly unsatisfactory, placing a great deal of pressure on the landlord’s ability to pay their mortgage.

To compound this, applications to court can be an expensive, confusing affair.  In recent years the cost of applying to court has risen from £150 to £355.  At the same time, applications to court have become more complex, with nearly half of landlords seeking advice from a solicitor before beginning the process.

The Welsh Government’s proposal with regard to extending minimum notice periods for a periodic standard contract

The minimum notice period for a Section 173 under the 2016 Act is two months, similar to Section 21 notices currently.  The Welsh Government proposes extending this period to six months.

Question 1: Do you agree with this proposal?

No

Question 2: Please tell us why.

As we have already established, landlords do not seek possession without good reason and they prefer to keep good tenants in the property.  Nevertheless, having the security of Section 21 or its replacement, Section 173, is important to 96.1% of landlords according to our recent survey.  In fact, it is so important that only 1.9% of landlords could imagine operating in the current system without Section 21.  If it was removed without significant improvements to grounds based possession. 41.3% of landlords could not imagine operating in the PRS at all without it, even with significant changes.

As a result, the RLA is pleased that the Welsh Government does not plan to remove Section 173 entirely as this could cripple the ability of the sector to provide homes.  However these proposed changes are still best avoided and should certainly not be implemented without a number of improvements to the dysfunctional grounds-based possession process.

The courts simply take too long to provide possession where the landlord has a legitimate reason to regain possession.  Even with a 2 month notice period, tenants may stay in the property for an average of 7 months once a notice has been served.  It is little wonder then that 79% of respondents to our survey were dissatisfied with the court process. Considering that the overwhelming majority of these cases relate to rent arrears this is already far too long for those reliant on the rent to pay their mortgages. 

Extending the time frame for notices without also improving the speed and efficiency of the court process will only reward poor tenants for poor behaviour.  A new, low cost specialist Housing Court with vastly improved bailiff response times would be absolutely essential to retain landlord confidence in the sector if this proposal is enacted.

As long as grounds-based possession is not fit for purpose, many landlords will likely continue to prefer the certainty of Section 173 over the risks inherent with grounds-based possession. Unfortunately, nothing in the Renting Homes Wales Act improves this.  In fact, the number of mandatory grounds on which a landlord could confidently seek possession will be reduced significantly.

The remaining mandatory ground in the Renting Homes Wales Act is open to abuse by tenants in the same way the current ground for rent arrears is under Section 8. As the tenants need to be in 2 months arrears at the time the notice is served and at the point of the hearing, many tenants pay just £1 off their arrears just before the date of the hearing. This £1 removes the mandatory ground, leaving the landlord with virtually 2 months of arrears, £355 in court costs, and a tenant who is likely to continue to build up further arrears in the future. If Section 173 is extended without revising the ground so that persistent rent arrears becomes a mandatory ground then it risks clogging up an overstretched court system with many more of these cases.

The end result is bad tenants will remain in properties for longer, risking the landlords mortgage in the case of rent arrears, or blighting the community where the tenant is anti-social. If these proposals are to be implemented then there must be a significant strengthening of the rights to possession in the event that serious anti-social or illegal behaviour is occurring.  Incorporating something similar to Ground 7a of Section 8 with a reduced notice period would allow landlords to have some confidence that the worst tenant behaviour could be ameliorated.

Even where tenants have not breached their contract there are significant concerns that are not addressed.  One of the key mandatory grounds that will no longer exist after the Renting Homes Wales Act comes into force is the right for landlords to regain possession of their own home.

This is of particular concern for members of the armed forces for example. When working away from home, the personnel may be provided with Service Family Accommodation.  As licensees under a Crown Letting, these personnel and their families, may be served a 93 day notice by the MOD.  Under the present regime, where 2 months notice is required to regain possession, this type of landlord would have adequate time to inform their tenants so that they could move back into their own home. 

Under the new proposals these members of the armed services would have to find alternative accommodation.  This may 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. 

Question 3: How do you think a longer notice period will affect you? Please consider both positive and negative impacts

Our research shows that landlords are lacking in confidence and increasingly likely to leave the PRS.  At present, the private rented sector provides an estimate 400,000 homes. Only landlords in the West Midlands had less confidence than their Welsh counterparts in our most recent Confidence Index. With increasing regulations and tax burdens on landlords, confidence in the sector is fragile; removing the ability to confidently regain possession in a timely fashion where landlords have a legitimate reason will likely lead to a significant reduction in homes available to tenants.

Should this reduction in homes occur, the impact will fall hardest on the most vulnerable members of society.  Our research on possession reform found that 89% of landlords would become more cautious in who they let to if Section 21 was unavailable to them. Similarly Manchester Metropolitan University’s independent research found that landlords would be significantly less likely to rent out to the most vulnerable tenants without Section 21.

This is not surprising. Without confidence that they can regain possession with a legitimate reason, these landlords will want certainty that their tenants will pay the rent and not damage the property. Given the widespread issues with Universal Credit and arrears, landlords are likely to avoid tenants who are in receipt of it. Similarly, tenants with pets already face difficulties renting properties due to fears over damage or absolute restrictions in superior leases.  These tenants are likely to face even greater restrictions as well.

Landlords may also move towards 12 months tenancies to ensure that they have the same security of income as the tenant has with tenure.  While some tenants may appreciate this certainty, it is by no means universal.  In last year’s consultation on longer term tenancies a fifth of tenants were unwilling to accept a tenancy of longer than 12 months.  These tenants valued the flexibility of shorter tenancies.  Implementing these changes will deprive tenants of options. A better solution would be to allow tenants to take shorter tenancies if they wished, with a reasonable notice period length for both landlord and tenant.  If the intention of these changes is to increase the length of tenancy terms, it may be better to provide incentives for landlords to offer longer term tenancies.

Proposal regarding when a section 173 notice can be issued under a periodic standard contract

When the Renting Homes Wales Act comes into force, the legislation will bar landlords from serving a Section 173 notice for four months. The consultation is seeking responses on increasing that bar on service from 4 to 6 months.

Question 1: Do you agree with our proposal to increase the period in which a Section 173 notice cannot be issued from four months to six?

No

Question 2: Please tell us why.

The intention of this change is to limit the use and application of shorter term tenancies.  The RLA would question the reasoning behind this for a number of reasons.

The more elegant solution to this perceived problem is to rely on a contract that provides a certain term for both while retaining the flexibility that makes the private rented sector attractive as an option.  Increasing the security of tenure period would only reduce this attractiveness and flexibility; this is something the Law Commission has already deemed unsatisfactory and counter productive compared to relying on contractual provisions. This will fail to serve a significant minority of tenants.

This change will also increase the use of grounds based possession in the courts.  As already discussed, landlords are overwhelmingly serving Section 21 notices where the tenant is in breach of their contract.  If landlords cannot rely on Section 173 until 12 months has passed they will have to be able to confidently use the grounds-based possession route.  In Scotland when possession reform was implemented, they doubled the amount of tribunal members, but this still severely underestimated the number of cases and the resources required to handle contested possession claims. As a result they had to hire a significant amount of staff to cope with this influx.  As Wales does not have the same powers to reform and improve the court system, and has a significantly larger PRS, these changes risk making the already lengthy court delays intolerable.   

Question 3: How would this change affect you?  Please consider both positive and negative impacts?

Many tenants, particularly more mobile groups such as young professionals, will want access to shorter term tenancies.  If landlords will always have to wait until 12 months has passed until they can apply to court for possession, then they will more than likely exclusively offer tenancies of that length. As these tenants are also in regular employment, they are exactly the type of tenant that a landlord would like to keep in the property long term.  As a result, this change would be to the detriment of these tenants as they lose the flexibility.

By contrast, the tenants who are a riskier proposition for landlords are likely to find themselves struggling to find accommodation with the proposed changes.  With the dysfunctional court system and the lack of confidence in the grounds-based possession route, the landlords who do not leave the sector will overwhelmingly become more cautious in who they rent properties to.  Without significant welfare and court reform, this will place an even greater strain on a creaking, underfunded social housing sector.

Proposal to set further time limits on issuing a section 173 notice under a periodic standard contract

The Welsh Government proposes placing a six-month restriction on the re-issuing of a Section 173 notice after the previous one has expired.

Question 1: Do you agree with this proposal?

No

Question 2: Please tell us why.

The RLA takes the view that 6 months’ notice is already more than necessary given the additional 22-week average to enforce that notice.  This proposed change would mean that landlords face a 17 month wait to regain possession of their home in many circumstances.  As almost all these notices are served because of rent arrears or anti-social behaviour this wait is far too long.

Worse, this would incentivise the use and applications of the notices where they are served.  Many landlords use the notices seeking possession as a warning to tenants who are slipping into rent arrears once reminder letters or other more informal action has failed.  Where a tenant seeks to improve their behaviour as a result of this, under the current system the landlord has the time to monitor and allow the tenant to show good behaviour.  If they are faced instead with a hard deadline by which they must act landlords are likely to apply to court rather than risking the return of poor behaviour.

Question 3: How would this change affect you?  Please consider both positive and negative impacts.

As with the other proposals, landlords are likely to become much more cautious in who they rent to and also far more likely to act on any notice served even if the tenant improves their behaviour.  Landlords will also become far more likely to screen out tenants who are not ideal, increasing the burden on the social rented sector.

The Welsh Government proposes that where a court has deemed a notice under Section 173 of the 2016 Act to have been issued in a retaliatory fashion (e.g. to avoid undertaking repairs reported by the contract-holder) a landlord will be prevented from issuing a further notice under Section 173 for six months.

Question 1: do you agree with this proposal

Don’t know

Question 2: Please tell us why

We would question the worth of this proposal based on our research.  Retaliatory eviction is extremely rare with most landlords acting on the basis of the tenants poor behaviour. What this proposal likely will do is create a further backlog in the courts as, unlike in England, there are no easily identifiable process by which retaliatory eviction may be identified. 

Question 3: How will this affect you?

This change will likely lead to an increase in the number of contested claims, extending the time taken to enforce a possession judgement.  It is unlikely to lead to any increase in property standards however as the RLA membership already provide good quality housing to tenants and are aware of their repairing obligations.

Additional restrictions (EPC, gas safety certificates, etc)

Question 1: Do you agree with this proposal in principle?

Don’t know

Question 2: Please tell us why.

There is already existing legislation in place that requires these documents to be served and their service should be enforced by these existing mechanisms.  In addition, implementation in England has led to a number of confusing, unfair court cases that create uncertainty in the process.  For example, the ongoing issues around the service of gas safety certificates in England will require an upcoming Court of Appeal case to resolve whether or not late service can be rectifiable.

We would question the value of recreating the confusion caused in cases such as Trecarrell House Ltd, and if this legislation is implemented there must be a clear process by which late service can be deemed sufficient.

Email service of documents should also be expressly permitted if these changes are implemented.  This would minimise the chances of lost paperwork causing unnecessary delays at court hearings and would go some way to ensuring landlords can confidently regain possession where they have a legitimate reason to do so.