The End of Section 21 Possession and Assured Shorthold Tenancies? - Boodle Hatfield

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31 Jul 2019

The End of Section 21 Possession and Assured Shorthold Tenancies?

Hot on the heels of the Government proposals for leasehold reform, the Government has published a Consultation seeking views on implementing its proposals to repeal section 21 (s21) of the Housing Act 1988 (HA 1988) and improve the possession procedure under section 8 of the HA 1988.

The Government announced its intention to repeal s21 of the HA 1988 in April of this year. The current Consultation: “A New Deal for Renting: Resetting the balance of rights and responsibilities between landlords and tenants” expands on the proposed reforms and seeks views on the following proposals:

  • The impact of removing section 21 and, as a consequence, the demise of the assured shorthold tenancy
  • The reform and use of the existing grounds for possession set out in Schedule 2 to the HA 1988 following the removal of section 21
  • How possession orders under section 8 of the HA 1988 may be processed more efficiently

The Consultation closes on 12 October 2019. The proposals for reform are significant, described in the ministerial forward to the Consultation as being a “generational change to the law that governs much of the rental sector”. A lively consultation period is anticipated, with many landlords likely to be reluctant to see the demise of the assured shorthold tenancy (AST) and the flexibility and control that it affords both landlords and tenants and the loss of the relatively straightforward s21 possession procedure.

The Impact of Removing Section 21

ASTs were introduced by the HA 1988 to offer greater flexibility for landlords who wanted to let properties for shorter periods and for tenants that wanted the flexibility of a short term let. The use of an AST currently gives the landlord the ability to end the tenancy, without fault or reason, by giving two months’ notice under s21 of HA 1988, a situation described in the Consultation as leaving tenants “perpetually vulnerable” as such tenancies can be ended on relatively short notice.

The removal of s21 would mean that all future tenancies would be assured tenancies (either fixed term tenancies or assured periodic tenancies). A tenant under an assured tenancy may not be evicted unless a landlord can illustrate a valid reason for taking back possession of the property under section 8 of the HA 1988 and satisfy a judge of the validity of the claim. Under the proposed new framework there would be a number of potential ways in which a tenancy could be brought to an end:

  • Fixed term tenancy: Tenants would be able to end the tenancy at the end of the fixed term (or earlier agreed break date) on giving the landlord notice under the terms of the tenancy. As is the case now, this type of tenancy would roll into an assured periodic tenancy at the end of the agreed term unless a further new fixed term is agreed and may be subject to an as yet unspecified minimum fixed term.
  • Assured periodic tenancy: Tenants would be able to end the tenancy at any point subject to giving the appropriate notice. This type of tenancy is referred to in the Consultation as an “open ended” tenancy.
  • In either scenario: Landlords would be able to end the tenancy by issuing notice under section 8 of HA 1988 providing it can show that one of the statutory grounds set out in Schedule 2 of HA 1988 applies.

The reforms envisage the statutory protection currently afforded to AST tenants under legislation such as the Deregulation Act 2015 (rent deposits, gas safety certificates and EPCs) and the Tenant Fees Act 2019 (prohibited payments to landlords) being extended to apply to all assured tenancies. However, it is not clear how this will coexist with the grounds for possession and whether a landlord who has not complied with these statutory requirements will be prevented from obtaining possession under Schedule 2 (as is the case with the current s21 procedure) even where the tenant is at fault.

Reforms to Schedule 2

Schedule 2 of the HA 1988 sets out a number of mandatory grounds (meaning the court must grant the possession order if the landlord can prove the grounds to the court) and a number of discretionary grounds (meaning the court may grant possession order if the grounds are proven). The Consultation acknowledges that many landlords prefer to use the s21 procedure to obtain possession even where a tenant is at fault and one of the grounds in Schedule 2 applies as it is seen as a quick and straightforward process. As a result, the Government intends to review and improve the Schedule 2 grounds to ensure that landlords can obtain possession using the mandatory/discretionary grounds where there is legitimate reason to do so.

No fault grounds for possession

The Consultation outlines the following proposed changes:

  • Occupation by the landlord or a family member: Widening ground 1, the mandatory ground that allows a landlord to gain possession if he wishes to use the property as his own home once the fixed term has expired, to include children and family members of the landlord or their spouse or partner (without a requirement that they have lived in the property previously).
  • Sale of the property: Creating a new mandatory ground to allow a landlord to obtain possession where it intends to sell the property with vacant possession, subject to consideration of the level and nature of proof required to satisfy this ground.

Other grounds for possession

The Consultation also seeks views on the following amendments:

  • Significant rent arrears: Re-structuring ground 8 to allow a landlord to serve a two-week notice for possession once the tenant is two months in arrears. Possession under ground 8 would then be mandatory if the tenant has one month or more arrears outstanding at the date of the hearing, or, discretionary if the arrears are under one month at this date. However, if it can be shown that arrears have built up and been paid down on three previous occasions, this must be considered to be a mandatory ground.
  • Breach of tenancy (other than payment of rent): Reviewing the effectiveness of ground 12 to make it easier for a landlord to seek possession following a breach of tenancy agreement.
  • Anti-social behaviour: Updating ground 7A (conviction of a serious offence in or around the property against someone living in or around the property or the landlord). Updating ground 14 and 14A (anti-social behaviour and threats of violence) so that ground 14A applies to all tenancies (not just social housing) with particular focus on protecting the victims of domestic abuse.
  • Neglect of property: Amending ground 13 to allow a landlord to seek possession if the tenant is obstructing the landlord’s ability to keep the property safe as a result of neglect or wilful action.
  • Agricultural holdings: Introducing a new mandatory ground for possession relating to dwellings on agricultural holdings, where either the dwelling is sub-let and the head tenant wishes to end its agreement and retire, or there is a business need for the landlord to gain possession.

Possession Orders

One of the main reasons given by landlords for using the s21 termination procedure, rather than a specified mandatory or discretionary ground, is that the s21 procedure allows the landlord to apply for accelerated possession and to have the case decided without a hearing with the landlord’s case and defence dealt with in writing and it is therefore a quicker process. Landlords will therefore be concerned to see the demise of s21. This is recognised and addressed by proposals to explore whether the accelerated possession procedure could be extended to applications for possession under section 8 of the HA 1988, in relation to some or all of the mandatory grounds for possession.

Short Term Lettings

The Government recognise that the proposals for reform may not be suitable for all tenants, particularly those who intend to occupy for a short time including holiday lets, transitional lets (where people are moving home but can’t move immediately) and work related lets (such as a short term job assignment). Consideration will also be given to whether special provision is required for affordable housing (for example, on build to rent developments) where dwellings are allocated to key workers satisfying eligibility criteria, to enable possession to be obtained where the occupiers are no longer eligible.

Transition Period

Any new legislation that comes into force following the Consultation will not be retrospective. Landlords will still be able to use a s21 notice to end an existing AST that continues beyond the date when legislation comes into force and the new regime will apply only to those tenancies granted after the implementation of the new legislation. A six-month transitional period is proposed, to apply from the date of any legislation, to allow landlords time to prepare for any new regime.

The Consultation can be viewed at GOV.UK.