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Housing Act 1988 section 21 – blessing or curse?

People Entering HouseAs Samir pointed out in his post on rent control, this month is the 25th anniversary of the passing of the Housing Act 1988.

I want to take a look at the effect of section 21 and the assured shorthold tenancy.

The bad old days

Prior to 15 January 1989 when the Housing Act 1988 came into force – you had to be very careful about letting tenants into your property as you might never get them out again.

Here are two examples from my experience.

Example 1: I can vividly remember advising a young man in about 1990.  He had bought a house a few years previously and, not being able to live in it at that time, had rented it out.

Come a few years later he wanted it back to live in himself. The tenant refused to move out, so he came to me for advice .

However after doing some careful research (and also taking Council’s opinion)  I had to advise him that his chances of getting the property back were minimal.  Short of providing ‘suitable alternative accommodation’, which he could not afford.   My client was a single young man – the tenant had a young family.

He was horrified but there was nothing we could do.

Example 2: My last piece of ‘proper litigation’ involved evicting a protected tenant from a farm workers house.  The landlord had let a friend fleeing from an abusive husband into occupation for six months in the 1970′s.  Needless to say the abusive husband then joined her and they were there for the next 30 years.

I managed to get the property back so the landlords could use it for their farm manager, but they had to buy another property to move the tenants into first.  Even so they were delighted as they had been told they would never get it back during the lifetime of the tenants.

Bad for society

The strong security of tenure for tenants under the Housing Act was great for tenants but actually bad for society.

Very few property owners were willing to rent out property in circumstances where they were unlikely to get it back again and the pool of rented property dropped dramatically.

This was hurting society as there was hardly any short term accommodation available for people who  needed it.  This affected the ability of people to move for their jobs or indeed for any reason,  Which was not good.

The new broom – and the assured shorthold tenancy

Mrs Thatcher was elected in 1979 and one of the things she wanted to do was ‘fix’ the rented property market.  This she did eventually, with the passing of the Housing Act 1n 1988 – which created a new tenancy type.  The assured shorthold tenancy.

The main driver of the current buoyant buy to let market, is the right for landlords of an assured shorthold tenancy, under section 21 of the Housing Act 1988, to recover their property provided they follow the proper procedure.

This means that landlords no longer have the prospect of losing all control over their property for the foreseeable future.  Recovering a property under s21 is not quick, but it is certain.

This massive change, coupled with the new buy to let mortgages that were developed in the 1990′s, meant that it was once again economically viable for people to invest in property to rent.

The new problem for society

So we now have lots of short term rented property available so people are no longer prevented from moving simply because there is no rented accommodation available for them to live in there.

However we now have a new problem.  This is the difficulty people have now in finding any long term security.  This is also due to section 21.

The section 21 problem

Contrary to what many people think, the majority of landlords are not rich people.  Most private sector landlords are individuals who own between 1 and 5 properties, often instead of a normal pension.  They are usually comfortably off, yes, but not really wealthy.

So they cannot afford, for example, to have people living in their properties who are not paying rent or who are causing problems in some other way.

Section 21 is their friend here, as section 21 allows them to remove bad tenants fairly easily.  However section 21 can ONLY be used after the fixed term of a tenancy has come to an end.

This means that very few landlords are prepared to grant fixed terms of more than six months or a year (even if their mortgage company were prepared to allow this, which normally they don’t).  Otherwise they would be in difficulties if their tenant started paying rent irregularly (which would cause them financial problems).

There is a ground for eviction based on serious rent arrears, but this is more problematic than the section 21 procedure and usually takes longer.  It it is in landlords’ interests therefore to grant short fixed terms, so the right to use s21 is never more than about a year away at most.

The problems of short term housing

Many tenants are perfectly happy with a short term commitment.  However others are not.

It is particularly bad for families, where it is important that children are able to remain at their schools without being moved every year.  Older people are also unhappy at being at risk of eviction within a few months.

If you have a short fixed term your right to stay in the property will never be more than two months or (if your fixed term has more than two months to run) the end of your fixed term.

This discourages people from putting down roots into the community.  You do not feel the same about somewhere if you are at risk of having to move on within a couple of months.  Which is not good, long term, for society.

A more serious problem for some

Then there is the more serious problem of ‘retaliatory eviction’ where landlords deliberately evict tenants under s21 when they ask for repair work to be done on their property (or in ‘bad landlord’ parlance, when they are ‘troublemakers’).

There is no point in investing money in bringing a claim for an injunction ordering the landlord to carry out repair work, if the tenants are shortly going to be evicted under s21.  Until the next tenant moves in – and has the same problem.

Solutions?

Lots of people have made suggestions about solutions for this problem.  Some people suggest mandatory longer tenancies – but some tenants don’t want this.  I made a few suggestions in my ‘Bigger picture’ ebook (which you can >> download from here).

But it is a problem. What do you think?

Buffer

Important note. If you are reading an old post, remember that the law may have changed since it was written.




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11 Responses to Housing Act 1988 section 21 – blessing or curse?

  1. I see two big problems with S21.

    a) It is too cheap for a landlord to serve a S21 notice and tenants with money in the bank have no defence and can’t risk not leaving on the given date.

    b) It is too hard and expensive for a landlord to enforce a S21 notice when the tenants have no money in the bank.

    Maybe the state should make a charge to landlords for serving a S21 notice, but then take over the responsibility for enforcing it.

  2. The state take over and run possession claims for landlords? Thats NEVER going to happen!

    Actually its not that expensive to get possession under s21. +Plus members of my Landlord Law site can use my DIY eviction kit and then all they have to pay are the fee for Landlord Law membership (£96 miminum for +Plus membership) and the court issue fee of £175.

    You can read about the eviction kit here http://www.landlordlaw.co.uk/eviction

  3. The cost of getting possession under s21 can include a lot of lost rent and damage to the properly. I agree the costs are not high if the tenant is a good tenant….

    The state has already taken over the enforcement of a lot of laws when the police were first set up, before that landowners had to enforce all laws themselves.

    More recently the state has taken over removing squatters, so way not also when someone ignores an eviction notice?

    I would like to see the £175 charge having to be paid by the landlord at the time that the S21 is issued, and the S21 having to be issued var the court service. Then the rest of the preprocess to be streamlined with the tenant having 1 month from the date of issue of the S21 to put forward any case for why it should not be enforced on the date it expires.. (And landlords not being able to just keep a S21 on file encase it is needed.)

  4. The state is not there to protect landlords from losses incurred because they installed a bad tenant. I’m sorry Ian thats just never going to happen.

    Squatting is a criminal offencw – thats why its enforced by the police.

    Section 21 and eviction proceedings come under the civil law. http://www.landlordlawblog.co.uk/2010/12/18/criminal-law-and-civil-law-explained-they-are-not-the-same/

    We may perhaps one day see changes in court proceedure to make it quicker for landlords to evict bad tenants but it does not look likley at the moment.

  5. The biggest problem I see with the rental market is that the needs of short, medium and long term tenants/landlords are trying to be met by the a single set of rules.

  6. I may be answering the wrong question, but there is no perfect solution (there are few perfect solutions to any of life’s problems).

    In terms of Statute generally it never manages to get the pendulum to balance in terms of fairness on anything. Take speed limits for driving as a simple example.

    The 88 Act came in with the intention of redressing the balance, but courtesy of s21 being mandatory unfettered possession was never going to achieve that. The only way to would have been for example to make retaliatory evictions illegal. They should be – if a LL has a statutory obligation why should he be able to avoid it by being allowed to evict the tenant?

    The best solution (if there is one) is to have a menu of ASTs available, raninging from minimum 6 month terms (which the tenant in effect has anyway courtesy of the 1996 Act) through various fixed terms on various agreement terms. Longer the fixed term, greater the security of tenure, the longer the notice the LL has to give and the more repairing obligations the tenant has to take on.

    Example – like the old protrected shortholds 5 year term, LL gives 1 year notice meanwhile if the boiler breaks down tenant responsibility.

    Then we’ll see how keen some tenants really are on longer term tenancies

  7. The problem for LAs in assisting private landlords enforcing S21s is that it would mean that they then have to consider and process a homelessness application from the tenant even if they subsequently find the person intentioanlly homeless by reason of having been evicted. The amendment to the formal offer of accomodation regs in 2011 allows the LA to identify and offer an applicant a private sector AST in discharge of duty. Even if the LA find the person intentionally homeless, (by reason of eviction?)they still have a duty to provide advice and assistance and if children are involved ensure that they are adequately housed and if not consider social services provision. By assiting a private landlord they are creating additional duties for themselves. When the first push on ASB started it created alsorts of problems between ASB units and homelessness.

  8. I remember trawling the streets in the 70′s trying to find almost non existent property to rent. With a young family no-one would touch me – too much risk that they’d never get me out (they thought).

    So the ’88 Act has changed the whole complexion of renting in the UK.

    I think the system today is ok as it is – not perfect but what system is? We definitely don’t want the Government to meddle with it.

    As a Landlord I want long term tenants and most of my tenants want long term rentals. So we talk. They know I can’t guarantee them a life tenancy but they also know that if they are good tenants I’ll maintain the property to a high standard, keep rents at a reasonable level and have no reason to evict them. Long term my strategy is to sell some properties to pay down debt on the others but I’ll only sell properties when a tenant vacates.

    I’ve also had tenants who want a long term tenancy and then a few months later want to move. Relationship breakdown, unemployment, relocation, all sorts of things happen in people’s lives. The fact that they can leave with only a month’s notice works very much in their favour.

    If it’s not broke, don’t fix it!

  9. @Richard – I tend to agree with you – except that the current system is vulnerable to bad landlords using it to do retaliatory evictions.

    Where the landlord is a good landlord, it works fine, for the reasons you give.

  10. The 88 Act was fit for purpose as there was a desperate need to boost the %age of PRS from what was below 4%. Now it is 18% but the problems are different.

    I take your point Richard and talking is good but you could guarantee tenants a home for a long time if not for life if you chose to, simply by offering an AST but for say a 10 year term with no break clause, or one way in favour of the tenant. The only way to guarantee long term occupancy is to have a tenancy type which guarantees it if the terms are met – but that ain’t gonna happen.

    The homelessness provisions and voluntary v statutory interest me. 30 years ago I remember mortgage possessions when Nottingham CC sent observers to sit in Court. If the action was not defended then the borrower was voluntary homeless.

    Same argument can be applied to tenants who don’t pay their rent – they have made themselved homeless. Here lies a very nasty future problem for evicted tenants on LHA – if the rent was paid to them and not the LL and they don’t pay it are they voluntary homeless?

    I am no expert in this area and defer to the likes of Ben Reeves and Mary Latham on such matters. But my guess is an awful lot of future evicted tenants, as the pressure grows for social housing, are not going to find themselves picked up by the LA.

    David is right I saw his post after mine (honest!!) but great minds – what is needed is a menu of ASTs on different legal terms.

  11. On rent arrears and intentional homelessness.

    The Nottingham scheme would be impossible now because the open court system has gone, meaning strangers can no longer sit at the back of the court room earwigging, plus I would bet there were still challenges to intentionality decision on the basis that the defence didnt stand a prayer. But that s history.

    I often hear people (in my own office) raise the spectre of intentional homelessness whenever rent or mortgage arrears are mentioned but the fact is you have to look at what caused the arrears. Job loss may be the cause in which case no IH. However, if you did something daft or criminal that cost you the job then you may be IH. It’s down to what a normal person might have reasonably understood would be the result of their actions. What was the past cause of the present homelessness.

    And big changes are afoot. Colin Lunt mentioned above the new suitability order which promotes the discharge of homelessness duty into the private sector. This has been an option since 1997 but the new order makes it more difficult for an applicant to use homelessness as a route to a ‘Cahncil ‘ahse” (you gotta say it with a London accent like mine)

    I attended a workshop last year run by one of the authors of the new order, Andy Gale who suggested a new heresy, whereby council’s drop all the 5 homelessness tests, forget about intentional homelessness and priority need and just have the homelessness unit act like a letting agent, in one door, out with an AST through another.

    Of course to work the council would need a ready supply of PRS landords working with them, which isnt going to happen in London but it could work elsewhere




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About the post author:

Tessa Shepperson

Tessa is a lawyer specialising in residential landlord and tenant law. She runs the Landlord Law website (now in its 12th year) and is a director of Easy Law Training Ltd and Your Law Store. Tessa also sits on the Property Redress Scheme Council. When not working she enjoys reading, cooking and messing around on the computer. You can also find her on Google



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