Landlords on cliff-edge as Renters’ Rights Bill strains overburdened courts

Many landlords are facing a cliff-edge decision in deciding whether to sell up and many are holding on to see what happens, says a top property lawyer.

In an exclusive video interview with Property118, property litigation partner at Taylor Rose, Patrick Ansell, explains how the abolition of Section 21 ‘no-fault’ evictions will put further pressure on already overstretched courts.

Patrick also explains the new possession grounds for landlords and how banning upfront rent payments could affect students.

Property law career started by accident

Patrick explains his property law career started by accident.

He tells Property118: “I studied law and politics at Cardiff University. After graduating, I spent some time in a manual job, trying to figure out what I wanted to do longer term. That led me to go back to studying, and I completed the Legal Practice Course (LPC).

“After finishing the LPC, I got a temporary role at a London firm as a debt recovery paralegal. But through that, I was fortunate enough to be taken under the wing of a property litigator. The firm handled a mix of disputes, with a large portion of property litigation, and I happened to be in the right place at the right time.

“I went from paralegal to trainee, focusing on property litigation and qualified at my first firm in 2013. I’ve been with Taylor Rose since 2015.”

Section 21 abolition is going to be difficult

Section 21 is due to be abolished as soon as the Renters’ Rights Bill takes effect, but there are currently amendments going through the House of Lords aiming to delay the abolition until the courts are ready.

Patrick explains that serving a Section 21 notice under the current regime can sometimes be tricky and involves several challenges for landlords.

He says: “Landlords face numerous hurdles to serve a valid Section 21 notice and then follow the necessary legal steps if the tenant doesn’t comply with that notice.

“The main point is that a landlord can evict for any reason, and of course, you could have a bad landlord who simply doesn’t like the tenant and decides to evict them.”

Patrick says Section 21 offers landlords flexibility and many landlords will be worried about the consequences of its abolition, but the expanded Section 8 grounds will help.

He explains: “The Section 21 process has enabled landlords to have flexibility outside of any fixed-term, and the abolition is going to be difficult for people to get their heads around.

“The expanded Section 8 will hopefully take some of the pressure off and not be as bad for landlords as it otherwise would be without it. Hopefully, a lot of the reasons why a landlord might want their property back will be covered by Section 8.”

Section 21 abolition will put more pressure on the courts

Patrick explains that Section 21 abolition will put more pressure on the courts at a time when they are already stretched.

He says: “The court rules are that the first hearing in any possession claim, other than for trespassers, should be sooner than four weeks of issuing the claim but not more than eight weeks. That’s the window for most cases, and the first hearing for most cases will be just inside that eight-week period, but certainly not all the time.”

Patrick says he’s had an example of landlords waiting much longer to regain possession.

He explains: “I had an example of a county court in the north of England where we issued a claim at the end of June last year, and the hearing wasn’t until the 1st of November. This was around four months, and during that time, the landlord wasn’t receiving any rental income, which was the reason they issued the claim in the first place.

“It was an open-and-shut rent arrears case, but the landlord then had to wait for possession.”

He adds: “This new regime is not going to make it any better, and I think what some people might be familiar with is under Section 21, you have the accelerated procedure. It’s usually seen as the quicker option, as you don’t need a court hearing if the court is satisfied that the paperwork is all in order.

“As things stand at the moment, it doesn’t look like this will be an option in the new legislation. There isn’t a revamped accelerated procedure, meaning every case where the tenant doesn’t just receive the notice and walk away from the property will require a hearing, which will put more pressure on the courts.”

Landlords on a cliff-edge

Patrick explains that while we hear of many landlords wanting to leave the sector, there are some landlords waiting to see what happens.

He tells Property118: “When we meet landlords looking to leave the sector, it’s often for a variety of reasons. The tax rules aren’t helpful, there’s a perception that tenants have too much power, and there’s concern about not being able to evict tenants.

“Whilst we do have those conversations, I think at the moment our team hasn’t seen a glut of landlords saying, ‘I’m selling up because of the Renters’ Rights Bill’.

“It might be that landlords with one or two properties, perhaps those who inherited them or view them as a retirement nest egg, will reconsider once the full impact of the Renters’ Rights Bill becomes clear. That could be the trigger for them to leave the sector.”

Patrick adds: “When we know exactly when the Bill will receive Royal Assent and its final wording, that might be the kind of thing that pushes those already on the cliff edge to finally decide to sell. Some landlords who are already contemplating their future in the sector might think, ‘It’s now or never, I’m going to serve a Section 21 while I still can’.

“At the moment, we haven’t seen an avalanche of landlords leaving, but I suspect that, in the background, some are definitely considering it.”

Patrick adds that he expects the Renters’ Rights Bill receiving Royal Assent this year, but how long it will take for the changes to come into effect remains uncertain.

He says: “I’m expecting we’ll be dealing with a whole new set of regulations by the end of the year. The Bill could receive Royal Assent by the middle of this year, but when it will fully take effect remains to be seen. The more information that can be provided in advance, the better it will be for everyone.”

Section 21 sometimes isn’t an option

Patrick explains that even now a lot of landlords use Section 8 because sometimes Section 21 isn’t an option for them.

He explains: “We often have landlords approach us after experiencing issues with a tenant, only to find that they cannot serve a Section 21 notice, even under the current rules.

“This can happen for various reasons, such as still being in the fixed term of a tenancy that isn’t expiring soon. Other times, it’s due to an issue outside the landlord’s control, such as inheriting a property or purchasing one with underlying paperwork problems that make serving a Section 21 notice difficult or even impossible.

“In these situations, landlords must look at Section 8. We often explain that Section 8 provides a broad menu of grounds for possession, which will expand further under the new legislation. However, some grounds are discretionary, while others are mandatory.

“We rarely advise landlords to proceed with a discretionary ground because it gives the judge the final say on whether possession should be granted, even if the landlord has followed the process correctly. The mandatory grounds are far more reliable.”

New possession grounds for anti-social behaviour and rent arrears

Patrick explains under the new possession rules there will be two specific grounds for anti-social behaviour.

He adds: “One is a mandatory ground, which applies to serious anti-social behaviour. The other is a discretionary ground for non-serious cases.

“To prove serious anti-social behaviour, landlords will need to demonstrate that the tenant has committed a serious incident [crime] involving the property or someone residing in it. While this will be helpful in some cases, we don’t see a significant number of landlords currently seeking eviction due to anti-social behaviour.”

Patrick says the most common grounds currently relied upon in Section 8 notices are those relating to rent arrears and under the new possession rules, some things will be different.

He explains: “Under the updated Section 8, Ground 8, a mandatory ground for possession, the tenant must be at least three months in arrears when the notice is served. The landlord is then required to provide four weeks’ notice before initiating eviction proceedings, provided the tenant remains at least three months in arrears.”

“At present, landlords only need to wait until the tenant has two months’ arrears before serving a two-week notice. Under the new system, by the time a claim is issued, the tenant must still be in at least three months’ arrears, and that minimum must be maintained at the possession hearing.

“Some landlords worry about tenants ‘playing the system’, where a tenant in two months’ arrears (three months’ under the new rules) makes a small payment to bring their balance just below the threshold, frustrating the eviction process. This issue will still exist, but the threshold will move from two months to three months.

“In reality, most tenants don’t just stop paying their rent for no reason, there’s usually something behind it.”

Banning rent in advance

One of the amendments introduced in the Renters’ Rights Bill earlier in the year, was a ban on upfront rent payments.

Landlords will no longer be allowed to charge more than one month’s rent in advance, or, for those paying weekly, a maximum of 28 days upfront.

Patrick says banning rent upfront could cause difficulties for students.

He explains: “There are circumstances where both landlords and tenants may prefer to pay rent upfront.

“For example, non-international students receive their student loan at the start of each term. Back in my day, we would get our student loan on the first Monday of term and pay all our rent for the term upfront that same day, but under this change, that would no longer be allowed.”

Patrick believes landlords will likely require tenants to have a guarantor as a workaround, which could be an issue for international students.

He explains: “Landlords will be looking for more security and will ask tenants to provide a guarantor. For international students, this could be tricky since the guarantor would likely need to be based in the UK for recovery purposes.”

Patrick also points out that the ban on upfront rent payments will probably not apply to purpose-built student accommodation.

“It looks like this rule will only apply to the private rented sector and not university halls of residence.”

Future of the private rented sector

Patrick believes it will be a waiting game to see what happens with the impact of the Renters’ Rights Bill.

He says: “There’s no crystal ball, but there will always be a demand for private rented properties.

“I suspect things may settle down after the legislation is introduced, but some landlords may decide just before the Bill comes into effect that enough is enough and leave the sector.

“Some landlords may decide to give it a go under the Bill but then have a bad experience in trying to evict a tenant and decide to sell.”

Patrick says one of the main problems in the private rented sector is the lack of rental supply and its impact on tenants and landlords.

He adds: “The ultimate problem in the rental sector is the lack of rental stock, and that’s why rents are high. Bad landlords can get away with being bad landlords because there isn’t enough supply.

“What we don’t want is for landlords to walk away and not be replaced by good landlords. It’s very difficult to make changes without some knock-on effect, and at the moment, I think we just have to watch this space and see what happens.”

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