What is wrong with the Preventing Retaliatory Evictions amendment to the Deregulation Bill?

As readers are probably aware, Sections 1 and 2 of the Tenancies (Reform) Bill have been proposed as an amendment to the Deregulation Bill

As all major political parties support the principle behind the Tenancies (Reform) Bill. One way or another legislation will be introduced to (attempt to) protect vulnerable tenants from bad landlords who kick out tenants that raise repair issues, rather than make repairs.  I believe that landlords need to stop arguing about why such legislation should not be introduced and start looking at the proposed legislation and how to make it fair.

I have studied the proposed amendment and give a detailed assessment of what I see as wrong with it below.  In this assessment I use the references in the proposed amendment.

My assessment may be summarised as “the proposals meet the intent of the amendment, which is to protect tenants from bad landlords by making it illegal to evict someone just for requesting that a major health or safety issue be addressed, but the proposals do nothing to protect landlords from bad tenants and may have consequences that are detrimental to tenants, landlords and the Private Rental Sector (PRS) as a whole“.

What is wrong?

Issue: 21A(1)means that the earliest date for possession is 8 months after the service of a “relevant notice” (see 21A(9) by the local housing authority (LHA).  In practice this will be longer because of delays in inspection and issuing of the notice by the LHA.

Suggestion: I would suggest that

a)      The period for which the notice cannot be given should be based on the date on which possession can be sought and not on the serving of the notice, i.e “possession cannot be sought within a period of X months”.

b)      The period should start on the day on which the landlord is made aware of the defect by the tenant, making it independent of the LHA work load.

c)      There should be a period after the completion of remedial works during which possession cannot be sought.  I would suggest 3 months.
(I suggest this because research has shown that people will punish those they deem to have wronged them even if that is detrimental to their own interests; this gives a cooling off period after the bill has been paid)

Issue: 21A(2)(a) does not define what evidence is needed to show that a relevant complaint (see 21A(9)) was made to the landlord before the S21 notice was given.  Clarity is needed to cover the case where both the relevant complaint is made and the S21 notice is issued on the same day, as this could happen by coincidence.

Suggestion: A sealed, unopened letter addressed to the sender containing a copy of the relevant complaint or S21 notice, together with a certificate of posting for the recipient on the date of postmark or earlier.

Issue: 21A(3)(a) combines both a complaint to the landlord and a complaint to the LHA.  In the case of a complaint to the Landlord the LHA will not have decided to inspect the property as they know nothing about the complaint.

Suggestion:

a)      The defence should be only where a relevant complaint has been made to the LHA.

b)      The defence should be available only

1. where the relevant complaint is made to the LHA within 2 weeks of the service of the S21, or
2. where the tenant has notified the landlord in writing before the service of the S21 that they will be away from the property for a period not exceeding 21 days and the S21 notice is issued during the period of absence or up to 4 days before the period of absence, and has independent evidence that they were away for that period (e.g. from employer or travel company).
   in this case the tenant should be required to notify the LHA within seven days of their return.

Issue: 21A(4): Local authorities are well known for advising tenants to stay in a property until the day that bailiffs are scheduled to evict them, as that reduces pressure on social housing.  This clause allows LHAs to delay inspections to delay the ordering of possession to the landlord.

Suggestion: Six weeks should be plenty of time to inspect and decide if a relevant notice is required.  Therefore only sub-paragraph (d) should remain and should include a statement that the landlord has been notified prior to the date the S21 notice period expires that the council intends to serve a relevant notice.

Issue: 21A(3): This does not address the case where the landlord has agreed that there is a defect and has rectified that defect.

Suggestion: The defence should not be available where the defect identified in the relevant complaint was addressed more than one month before the service of the S21 notice.

Issue: 21B(1) does not give an exemption to 21A(3) if the relevant complaint is due to breach by the tenant and the LHA has not been notified.

Suggestion:  add suitable exemption.

Issue: 21B(2) The phrase “totally without merit” is open to interpretation, particularly by judges who tend to seek any justification for not granting possession to the landlord.

Suggestion: Needs wording to prevent tenants identifying problems and notifying landlords of them every 5 months or so in order to provide a defence to a S21 notice.  But also need to protect tenants who have genuine concerns about their health and safety but are seen by landlord as a pain.  Damp, leading to mould is a difficult one as it may be due to building defect, tenant action or building design.

It needs better minds than mine to come up with something that is fair to both tenant and landlord.

Issue: 21B(8)(a): This clause is likely to make obtaining a mortgage more difficult, may result in fewer properties available in the PRS, and may lead to the eviction of good tenants.

a)      Most buy-to-let mortgages are short term (2-3 years) and so regular remortgages are required.  Mortgage companies will not grant a mortgage if they cannot be sure of getting their money back.
This sub-clause says that mortgage companies cannot use S21 to obtain possession if a relevant complaint is in place and the mortgage was granted  whilst the current tenant had possession of the property.  Thus it is likely that mortgages will not be available whilst the property is let

b)      It is an unreasonable restriction on the ability of the owner of the property to raise funds against the property (as above, mortgages likely will not be available).  As many landlords use the increase in value of property to raise funds to purchase further properties to let, this will result in more people requiring social housing because the private-sector housing will not be there, but there will not be the social housing either!

c)      What is likely to happen is when a landlord wants or needs to remortgage, then he will first serve a S21 notice on the tenant.  This is unfair on good tenants.

Regardless of what mortgage companies might say now about this not affecting their willingness to lend, they may well change their minds when they start feeling the effects.

Suggestion: 21B(8)(a) to say “the dwelling-house is subject to a mortgage”.

What is missing?

Arrears and penalties to tenants

Issue: There are no penalties for tenant that have no valid defence but make up a defence to delay possession.

Landlords often use S21 to gain possession rather than a S8 ground because possession is guaranteed and so minimises losses where a tenant is not paying rent or is damaging the property, or the S8 ground is discretionary.  The accelerated process for S21 avoids the lengthy wait for a court date and avoids the possibility of a discretionary ground not being approved.

Allowing a S21 to be defended is likely to mean that a court hearing will be required if the tenant claims a defence, thus giving no benefit to a landlord over a S8 notice, and increasing landlord losses when rent or other monies are not being paid.

Suggestion: Making a defence to a S21 notice where the tenant knows or ought to know that the defence is without merit should be a criminal offence.  The punishment for that offence should be deprivation of liberty (community service, with imprisonment for non-compliance) and not fines, but should include compensation to the landlord.  The reasons for a criminal penalty are:

a)      Tenants that have not paid monies owed to a landlord will generally not have the money or income to pay a landlord what is already owed, so adding additional money owed (as a civil penalty) to the landlord will have no effect.

b)      The possibility of having a criminal record is likely to deter many tenants from making false claims.

The reasons for a non-financial penalty are:

c)      Tenants that have not paid monies owed to a landlord are unlikely to fear additional monies that they cannot pay.

d)     If tenants are able to repay some money, then a fine is likely to take precedence over a civil debt and the landlord is then penalised.

The actions that should be punishable by a criminal sanction include:

1. 21A(2)(a); 21A(3)(a) Claiming that a relevant complaint has been made when it has not.
2. 21B(1) The relevant complaint or relevant notice is due to a breach by the tenant.
3. 21B(2) The relevant complaint is without merit (including ‘did not exist’).
4. Making a false claim in association with a defence (but that may already be criminal, e.g. perjury).

Issue: A bad tenant can stop paying rent or damage the property and have many months before he is evicted under S8.  If the tenant has made a relevant complaint, then the same applies to a S21 notice. If the tenant has few assets and little income, there is little likelihood of the landlord recovering any of the debt and the debt will continue to mount causing hardship to the landlord.

Suggestion: 21B: A S21 notice should always be valid and there should be no defence to it if at the date of service the tenant owes the landlord any money for rent due or other obligation under the terms of the tenancy and that money is more than 14 days overdue.

Other Issues

Issue: The Tenancies (Reform) Bill, section 4, had proposals time limits for section 21 notices. Those proposals have not been included in the amendment.  Without the proposal of 4(2)(4D), the amendment is easily circumvented: issue a S21 notice at the start of the fixed term.

However, if I can see this, then legal brains in parliament will also see it and I predict that a similar clause will be proposed for the bill.

Suggestion: We need to consider the proposed amendment as though The Tenancies (Reform) Bill, section 4 onward, is part of the proposal.

Issue: 4(2)(4B) makes it impossible to regain possession at the end of a fixed term of 6 months.

Suggestion: Change ‘four months’ to ‘three months.

Issue: 8:21A(3) does not allow for any rent payment to be offset against other monies that may be owed to the landlord.

Suggestion: Add a clause to allow the court to order that part or all of the rent prepayment be retained by the landlord to offset other monies owed to the landlord by the tenant.

Now it is over to you fellow readers of Property118.

What have I got wrong, and what have I missed?

But please read the proposed amendments and the Tenancies (Reform) Bill before commenting so that we are discussing what is in the Bill and not what we think it might say.

Many thanks

Michael

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