UK: Deregulation?

Last Updated: 10 April 2015
Article by Alexander Kingston-Splatt

Most private residential lettings in England and Wales take the form of Assured Shorthold Tenancies ("ASTs"). ASTs are governed by the Housing Act 1988 (the "1988 Act"). Landlords who grant ASTs must wend their way through a minefield of legislation and case law which set numerous traps for the unwary. The Deregulation Bill, as the name suggests, is aimed at easing that burden. But some of the changes it will bring into force are likely, in practice, to have the opposite effect.

Tenancy Deposits

Landlords will be well-aware of the ongoing saga of deposits paid under ASTs. Since April 2007 such deposits have required to be protected through one of the government-backed tenancy deposit schemes. This change came in the Housing Act 2004 (the "2004 Act"), designed to cure the perception that many tenants were being ripped off by unscrupulous landlords taking any opportunity to withhold sums from the deposit. Not only does the 2004 Act compel a landlord to protect a deposit, but also to provide his tenant with certain "prescribed information" regarding the registration of the deposit, which among other matters explains the tenant's rights if a dispute arises.

Whilst it seeks to achieve a laudable aim, the mechanics of deposit protection have proved a nightmare for some landlords, due to a series of cases and consequential changes to the 2004 Act. The most troublesome of these in recent times has resulted from the decision in Superstrike v. Rodrigues (and subsequent cases which have followed it). When the fixed term of an AST comes to an end, a monthly "statutory" periodic tenancy arises automatically. The result of Superstrike and subsequent cases is that at this point in time a tenant's deposit must be re-protected, and the prescribed information re-served.

The consequences of failure are significant: if a landlord does not protect a deposit and serve the prescribed information, whether at the beginning of a new tenancy or on the "rolling over" of an old one, he will be unable to serve notice under section 21 of the 1988 Act. This notice is essential if the landlord wishes to regain possession of the property but the tenant is not in default of his obligations. Otherwise, if the tenant does not leave at the end of the tenancy, the landlord will have no right to obtain a court order for possession. Where the landlord has failed to register the deposit, the only sure way to recover the right to serve a section 21 notice is to return the deposit to the tenant.

However, the Deregulation Bill removes the need for re-protection and re-service in the event that the tenancy rolls over, provided the landlord originally did so at the beginning of the fixed term. This is of course welcome news for landlords.

Section 21 Notices

The form of section 21 notices will now be prescribed by regulations – until now this has not been set in stone, so long as certain information is included within the notice.

This is potentially both good and bad news for landlords. On the one hand, it may present a further potential trap if the old form of notice is used by mistake. On the other, for landlords in England (but not in Wales) there will be no need for the notice to specify a termination date coinciding with the last day of a rental period. This had historically been necessary in order to end a periodic tenancy, which caused landlords serious issues if the date identified in the notice was wrong by even one day. The Court of Appeal in Spencer v. Taylor held that identifying the last day of a rental period is unnecessary where a fixed term agreement rolls over, but this change will enshrine this decision in the statute itself. Again, this is a welcome clarification for landlords.

Of less welcome news is the fact that the Bill will prevent the widespread practice of serving a section 21 notice at the beginning of the tenancy, to expire at the end of the term. This is often done by professional agents to avoid the risk of the landlord forgetting to serve notice more than two months before the end of the term. The Bill provides that no valid section 21 notice can be served within 4 months of the beginning of the tenancy.

Similarly section 21 notices will now have a "use by" date, in that they will expire 6 months from the date they are served. As two months' notice must be given, this means that landlords will have just 4 months to commence their court claims, prior to the expiry of the 6 month longstop date.

"Revenge" Evictions

Perhaps the most uncertain of the changes relates to so-called "revenge" evictions. This is where a tenant complains to his landlord about the state of repair of the property and the landlord in response serves a section 21 notice.

Where a tenant makes a written complaint about the state of repair, and the landlord does not reply, does so but inadequately, or serves a section 21 notice afterward, tenants will be able to seek to prevent any eviction by contacting the local authority regarding the disrepair. The authority may then choose to serve a variety of enforcement notices in response, which will mean that the landlord will be prevented from serving a valid section 21 notice within 6 months of such enforcement notice.

For landlords who keep their properties well maintained, this in theory is unlikely to pose an issue. However, one source of concern will be the situation where a tenant makes spurious complaints simply to frustrate a landlord's legitimate right to regain possession. How this will work in practice will remain to be seen.

Conclusion

Whilst many of the changes to the AST regime being ushered in by the Deregulation Bill will be welcome news for landlords, others will arguably only worsen the regulatory position for residential landlords, and lay further traps for the inexperienced.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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