All change for Section 21 Notices … probably

The Deregulation Bill 2015 ("the Bill"), which recently had its final reading in the House of Lords will, if introduced in its present form, have a significant impact upon Landlords who let residential properties on an assured shorthold tenancy ("AST") basis due to the changes that will made to the section 21 notices (otherwise known as 2 month notices) regime.

The Bill also contains provisions relating to Tenant's deposits. As non-compliance with the TDS provisions of the Housing Act can impact upon the ability of a Landlord to serve a section 21 notice, I have briefly set out some of the TDS provisions of the Bill below

The irony of the Deregulation Act is that, for residential Landlords at least, the Bill will lead to further regulation. Landlords, already exasperated at the increasing controls imposed upon them will be thrilled to hear that the proposed changes will make it more difficult to recover possession through the section 21 procedure.

There is still some uncertainty as to whether the Bill will receive Royal Assent and come into force before Parliament is dissolved on 30 March 2015. However, given the cross party support the Bill has received, it seems to be a case of when, rather than if, the section 21 provisions of the Bill come into force. Some of the key changes are summarised below. Landlords should grasp the nettle and familiarise themselves with the proposed changes sooner rather than later.

No need for expiry date to coincide with end of a period of the tenancy.

In my article "Taylor made remedy to Landlord headaches", I discussed the Court of Appeal decision in the case of Spencer v Taylor (2013). In the case, it was held that where an AST was initially granted for a fixed term, that fixed term has lapsed and a statutory periodic tenancy now exists, a Landlord need simply serve upon the Tenant not less than 2 months written notice that he requires possession of the property. The Bill gives statutory effect to this judgment.

Not too fast.

Some Landlords as a matter of practice serve Section 21 notices immediately after entering into an AST, the notice usually stated to end of the fixed term. The Bill precludes the service of a Section 21 notice in the first 4 months of the tenancy.

Use it or lose it.

It is not uncommon for Landlords to serve a section 21 notice but then decide not to take any action upon the expiry of the notice. As Section 21 notices have no expiry date, a Landlord can rely upon that previously issued Section 21 notice to recover possession, even if it was issued months, even years before. This has long been criticised as being unfair to Tenants, the notice hanging over them like the Sword of Damacles.

The Bill addresses this practice; a section 21 notice issued by a Landlord will need to be used to recover possession within 6 six months from the date it is given to the Tenant, otherwise it will lapse.

Retaliatory Notices

Where a Tenant raises a grievance or concern with a Landlord, there are Landlords who retaliate by serving a section 21 notice upon the Tenant. The Bill will restrict Landlords from being able to serve retaliatory section 21 notices where the Tenant raises a complaint which centers on the condition of the property and the Landlord does not provide an adequate response and/or responds by serving a section 21 notice.

Tenant's Deposits

Where a Landlord of a property which was let under a fixed AST which commenced before 6 April 2007 but which became a periodic tenancy after 6 April 2007 secures a deposit and provides the Tenant with the prescribed information within 90 days of the Bill receiving Royal Assent, the Bill confirms that a Landlord will not be prejudiced.

Where a Landlord has complied with the TDS provisions of the Housing Act 2004 (having properly secured a deposit with an appropriate Scheme and provided the Tenant with the required prescribed information), a Landlord will not need to repeat the process when the fixed term ends and a statutory periodic tenancy arises.

Landlords of properties which were subject to a periodic AST before 6 April 2007 should protect the deposits, albeit the Bill confirms that that there will be no financial penalty for not doing so.

Whilst the provisions of the Bill will not apply to any Assured Shorthold Tenancy ("AST") already in existence at the time of the coming into force of the provisions or to any renewal of that tenancy as a fixed term or periodic tenancy, three years after commencement of the provisions they will become applicable to all ASTs, regardless of when they began. Residential Landlords letting properties on ASTs will, therefore be well advised to keep a watchful eye on the Bills progress.

Watch this space for further news!

This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.