Priya Sejpal, property litigation expert and senior associate at law firm BLM
On 2nd February 2022 the government unveiled its long-anticipated Levelling Up White Paper, an extensive document that sets out how it will complete a ‘system change’ of how the government works, in an effort to level up ‘forgotten’ communities across the UK.
Led by Michael Gove, there are several proposed changes within the document aimed directly towards the private rental sector, with an intention to improve overall quality of housing in the UK by 2030 and reduce the strain on tenant-landlord relationships. More specifically, it sets out to address poor housing standards, more easily identify rogue landlords and, most controversially, remove Section 21 notices.
Decent Home Standard
Announced as part of its pledge to improve overall housing quality, the paper sets out that landlords in the private rental sector will have to adhere to the Decent House Standard as a minimum requirement. If delivered, this would mean increased regulation on landlords once their property is let. Residents would be given access to more performance information and therefore can hold landlords accountable for issues more easily.
That said, the mechanics around this still need to be established and we are yet to be provided with a clear definition of what constitutes a ‘decent home’. It is also unclear what the repercussions – namely bans or fines – will be for landlords, if they fail to adhere to new standards. In order for these new measures to work as the government intends, tenants will need to feel empowered to hold landlords to account.
Whilst these standards – and the scheme generally – requires finessing, they do fit in well with the New Homes Quality Code that was launched in December 2021, which aims to help buyers with any issues or snags they have with their new build properties after sale.
National Register for Landlords
In keeping with its promise to crackdown on ‘rogue landlords’, the government also announced it is exploring a new national register for landlords.
Made available to renters before they sign a tenancy agreement, this would allow tenants to check whether certain standards are being met by their prospective landlord. This would include a record of fines and bans struck against the landlord and make letting properties more challenging for repeat offenders. In the long term, the government hopes this would drive out landlords that consistently subject tenants to poor conditions.
It would be a radical step and there is something to be said on the irony of having such a public record for landlords operating in the private rental sector. Presently, in England we have a scheme where local authorities can licence landlords, but this is not consistent across the board, nor has that scheme been nationalised as yet.
It seems to be the case that the effectiveness of having a national register will only be as good as the data provided. There is also the same question of repercussions and whether they are civil or criminal in nature, or both, and if they will be a good enough deterrent. Additionally, legislation – namely the Homes (Fitness for Human Habitation) Act 2018 – already exists to require landlords to meet certain standards, and tenants have significant powers in place to hold their landlords accountable. It begs the question as to what a national register would really achieve.
Removal of Section 21
Removal of Section 21 notices is the most contentious proposal. Currently, these are used to automatically begin the eviction process and are an effective legal instrument for landlords to repossess their property. Its removal would shake things up in the private rental sector and has many potential knock-on effects.
As a start, landlords would instead need to rely far more on Section 8 eviction notices. These trigger a more complex process and means that there will be scope for more litigation and costs, as not all grounds are mandatory. Tenants can more easily defend proceedings and will have an advantage in drawing out the litigation.
Equally, the landlord’s ability to sell their property or move into it using a Section 8 notice would be put in question. It’s been reported that these grounds cannot be used within the first two years of the tenancy and may come with a long notice period. It begs the question, how will landlords be able to show their intention to sell a property? Will they need to be at a certain point in the conveyancing process to be able to rely on this notice? It would make demonstrating a clear intention to sell or move tricky and highly subjective and this could also have the inadvertent effect of more properties being sold with tenants in situ and purchase prices plummeting.
Having said that, the court system is set to have an overhaul, which could mean a specialist housing court with expert judges, making the process more consistent, fluid and less costly to landlords. We may see accelerated possession proceedings that do not require a hearing woven into Section 8 later down the line, along with other amendments, such as repercussions for failing to comply. Over the years, the Section 21 notice process has generated a lot of legislation, with much of it centred around protecting deposits, providing tenants with certain information at the outset and more. The repercussions for not complying with some of these formalities means that in some cases, landlords cannot utilise the Section 21 procedure; will this be amalgamated into the section 8 procedure?
Given the routine criticism given to county court bailiffs for being slow once a possession order has been obtained, landlords that are applying for an enforcement would be well-advised to transfer their enforcement to the High Court for speed, for the time being.
Tenancy agreements will be another consideration for landlords. Typically, these include a clause expressly stating that a tenancy can be terminated using a Section 21 notice. Landlords may argue that any new legislation to be bought in cannot be applied retrospectively as it would breach Article 1 of the First Protocol to the European Convention on Human Rights – the right to peaceful enjoyment of one’s property. However, retrospective legislation has been introduced before by Parliament, so it is not guaranteed that these new rules will not impact existing tenancy agreements.
Ultimately, we may now see a wave of landlords serving Section 21 notices to avoid any issues with the Section 8 process later down the line. Or a wave of landlords trying to increase rent to deliberately drive tenants out either by relying on contractual provisions or through the section 13 process, albeit, both methods can be challenged by tenants.
Another human rights issue may also present itself in tenant selection. Landlords may feel pressured to become more selective over who they let their properties to. This “cherry pick” approach could well be viewed as discriminatory if landlords choose to let to more affluent tenants, due to a perceived lack of protection through the abolition of Section 21 notices.
The breadth of ambition set out towards the rental sector in the Levelling Up White Paper cannot be denied. The new proposals set out constructive ways for keeping better track of rogue landlords, however it will be difficult to enforce a new Decent Homes Standard and a national register without a rigorous legal framework in place.
The abolition of the Section 21 notice is undeniably the headline and would present the biggest challenges for the government going forward, as it will need to offer alternative repossession instruments for landlords without removing any rights from tenants.
Understandably, there remains plenty of speculation around how this will impact the property investment market. The rules are far-reaching and applicable to all types of landlords, from major property investors to first-time buy-to-let landlords, and all landlords should seek to educate themselves on what is a very active and evolving area of law.