Possessed by Possession notices

On Friday 28th August 2020, the Government continued their usual fun and games of updating important legislation and releasing guidance after the fact.

Only when they confidently believe the majority of housing solicitors, judges and barristers would have opened the second bottle of Merlot do they feel safe to make these Breaking News stories and Friday was no exception and we welcomed to the world the freshly born The Coronavirus Act 2020 (Residential Tenancies: Protection from Eviction) (Amendment) (England) Regulations 2020

The Coronavirus Act 2020 had already increased notice periods and plunged many landlords into an abyss of financial worry with some tenants believing a global pandemic is the perfect reason not to pay rent.

This was quickly followed by a number of Practice Directions which saw the court system closed in relation to possession proceedings.

 Unsurprisingly this blanket ruling had a detrimental effect on property owners whose tenants had built up rent arrears prior to the lockdown or had committed an offence such as anti social behaviour (ASB)

And this is what brought Fridays announcement, now landlords could serve shorter notice periods on those tenants whose breaches are not Covid-19 related, but like everything the Government has done throughout lockdown, these kneejerk announcements come with little or no guidance, but i have done my best to simplify the new notice periods and hopefully make it easier to understand, given that this amendment actually takes in 5 separate pieces of legislation and has incited a collective loss of will amongst property professionals.

I am sure I am not the only one reaching for a cross and some sage when i hear the word "Possession" mentioned in the news updates.  

The most important element for landlords to understand is that the new notice periods are all different and range from 2weeks to 6 months, you will need to ensure you have the correct ground for eviction and dates on your application form.

Section 21, the no fault notice, has its timeframe increased again from 3months to 6 months, in addition its shelf life of 6 months has also been extended to10, meaning landlords will have just 4 months in which to apply to court once the notice period expires.

The common grounds used for rent arrears Ground 8, 10 and 11 now have two sets of notice periods depending on whether the tenant is in 6 months rent arrears or not.

It is also important to make sure that if you are using more than one ground for the reason for eviction, that those grounds all have the same notice period, as you cannot have 2 or 3 different grounds if one is only 2 weeks notice but the other is 3months. 

Here is where it gets confusing.......

Where a landlord is relying on an Anti-Social Behaviour ground which will be 7A or 14, it is worth remembering that Ground 7A is a mandatory ground  but generally requires the tenant (or some other person residing in or visiting the property) to have been convicted of an anti-social behaviour offence or some other relatively serious disorder offence

Whereas Ground 14 although discretionary, only requires the tenant or an occupier to have caused a nuisance or annoyance to their neighbours, the landlord or the landlords agent. 

It is important to note that where ground 14 can be used it actually shortens the notice period for any other grounds that you are relying on for the same notice.

So if a landlord was also seeking possession under ground 1 ( now increased to six months) and also could show that there was anti-social behaviour under ground 14 they could give a notice which required no notice period and apply to court immediately  

If you do not have any evidence to support a Ground 14 claim, then you can't throw it in with the hope of  shortening notice periods overall,  but it can be used where there is evidence, even if the court is not ultimately persuaded to make a possession order under ground 14.

These new notice periods will remain in force until 31st March 2021 and not the previously announced 30th September 2020.

It is also now important to familiarise yourself with the new Pre-action process that will come into force on 20th September, when courts re-open, this will include the need for reactivation notices to be sent to both the court and the tenant along with supporting evidence of how Covid-19 has effected the tenant.

The courts WILL NOT automatically process possession claims which have been submitted prior to 3rd August 2020 so you will need to be proactive when seeking possession. 

Finally and a welcomed surprise, is both Form3and Form 6a have been updated to accommodate the change in notice periods. 

This link below will take you to a simple document explaining each ground for possession under Section 8 and its new notice period term.  

Updated Notice periods

Credit:https://www.jmw.co.uk/services-for-business/commercial-litigation-dispute-resolution/blog/ever-moving-target-changes-notice-periods-private-residential-tenancies

Buy a property and get a tenant for FREE

 In recent months there has been a noticeable increased demand in the BTL investment market for tenanted properties, this could be linked to the fact that tenants are renting for the longer term now and regarding properties as their home rather than a stop gap.

Leeds and Bristol showed the highest increase in demand with 55%, closely followed by Nottingham 51%, Cambridge 47% and Southampton with a 40% increase in demand.

However, the market is slow to catch up with demand, with Leeds only having 2.9% of properties on the market which are tenanted, Bristol 0.7%, Cambridge 1.8% and Southampton 1.6%.

In contrast Cardiff has the highest number of tenanted properties on the market for sale at 3.7% with a demand increase of only 38%.

Buying a property with a tenant in situ also referred to as a sitting tenant, can bring a number of benefits to the BTL investor.

Firstly, there will be no void period after the sale when you would normally be advertising for a tenant, this in turn will mean a saving on agency fees.

You inherit a reliable, trustworthy tenant which is extremely valuable to any landlord and you are guaranteed rental income from day one, you will be able to budget with confidence, knowing the rent you will receive until at least the end of the existing tenancy agreement in addition you will have access to the tenants full rental history something you may not get when using a referencing firm with a new tenant.

With a contract in place, tenants need not be affected at all by a change in the ownership of a rental property, ensuring their happiness and willingness to remain in their home is undiminished.

But it isn’t as simple as it sounds, nothing in property ever is.

It is important to remember when buying with a tenant in situ, the tenant will be entitled to continue to live in the property and the change of ownership does not override the tenancy agreement and the tenant’s rights.

You will not be able to evict or increase rents until a fixed term tenancy ends and depending on when the tenant took up occupation, you may find you have a Protected tenancy which brings its own problems

Buying a property with tenants in situ is different to the normal sales process and will need a conveyancer with commercial experience.

Extra care is needed as in addition to the standard enquiries that need to be made in all conveyancing transactions, it is critical to make enquiries about the tenants.

It is important the seller provides all the details relating to the tenant, including the Tenancy Agreement this is key to establish when the tenancy was created, the status of the tenants and how they may be regulated by legislation, as different forms of security apply to different tenancies.

You will also need to ensure the seller has been compliant and how this will impact you as the buyer, checking the original deposit has been registered and after the sale transferring it to your name, you will need to protect it again, and reissue the prescribed information.

Making sure the property meets safety regulations and all the necessary certificates are in place, such as energy performance, gas and electrical.

(if furnished) that the furniture is in an acceptable condition and meets safety standards.

In an industry where there is a notice for just about everything, it is important to familiarise yourself with the notices and their timelines that will need to be served on the tenants once the property is purchased.

Section 3 of the Landlord and Tenant Act 1985

Section 3 places a mandatory duty on a new landlord to tell the tenant that they are in fact the new owner, having taken over from the old one, this is still the case even if the seller has already informed the tenant.

The new owner must give this notice no later than next rent due date or 2 months from the date of sale, it must inform the tenant that they are the new landlord and must provide their name and address (this must be the landlord’s actual address, not just an address for service of documents).

Important caveats

If the new landlord has not served a S3 notice on the tenant then the previous owner remains liable for any breaches of the tenancy agreement, such as disrepair, until the notice is given, in addition  both the old and the new landlord can be held jointly and severally liable for any breach.

More importantly S3(3) states A person who is the new landlord under a tenancy falling within subsection (1) and who fails, without reasonable excuse to give the notice required by that subsection, commits a summary offence and is liable on conviction to a fine not exceeding level 4 on the standard scale.

In short this means being prosecuted in the Magistrates court and the scale 4 fine is currently £2,500.

Section 47 of the Landlord and Tenant Act 1987

S47 requires that any written demand for rent by the landlord to the tenant, must include the landlord’s name and residential address and if that address is not in England and Wales, an address within England and Wales is required, so notices can be served. The purpose of the requirement under Section 47 is not to give the tenant information as to where the notices can be served, but to confirm the identity of the landlord. Using a managing agent’s address does not confirm the landlord’s identity, as it is not the landlord’s actual address.

Section 48 of the Landlord and Tenant Act 1987

Section 48 of the Act prevents landlords being able to seek possession of the property on grounds of rent arrears until the tenant has been provided with an address at which notices in proceedings can be served and the tenant will not be liable to pay rent until the landlord complies.

Interestingly S48 does not state that the landlord’s personal address is required for the amounts to become due. So a landlord can seek possession of a property on rent arrears grounds or the arrears themselves if he has provided an address at which notices and proceedings can be served. This address can be the landlord’s own address, that of the landlord’s letting agent, solicitor or friend. The address can also be a business address, preferably a registered office.

Finally, if a tenant has already paid rent on a defective rent demand, he or she may well be able to claw back up to six years’ payments on the basis that they were paid under an invalid demand.

What is a tenancy agreement

I see so many keen people entering the property industry as Rent 2 Rent operators believing it to be a risk free money making  option.

Yes it can be a great step on the property ladder but it certainly isn’t risk free.

The most common mistake I see time and time again is R2R operator signing Assured shorthold tenancies (AST) with property owners and then renting the property to tenants who are also issued with an AST.

This equates to subletting, which until specific permission has been sort from the owner, their mortgage company and related insurers is classed as illegal.

So why is an AST not right for R2R?

An AST is an interest in land for a set period of time and for a set rent, the term tenancy is usually used to refer to a short term interests where lease is used for long term interests 

When a landlord and tenant sign an AST the landlord is giving the exclusive possession of the property to the tenant meaning they have control of the property, for this to be legally possible the tenant MUST be in occupation and use the property as they only or main home.

If a tenant never takes up occupation then the AST legally doesn’t come into force.

With this in mind R2R operators who sign ASTs with owners have no agreement in place for the job they will be doing and could find themselves in hot water should the landlord wish to regain possession of his property.

Without the correct agreement in place a R2R operator will have no rights and no power to stop the landlord dealing direct with the tenants and removing the R2R operator with immediate effect.

An AST is a Housing Act tenancies which is also covered by Protection from eviction act 1977, the occupying tenant will also have rights with regards to repairs to the property as well as quiet enjoyment.

If a tenant never takes up occupation none of these can apply, the R2R operator is known as a 'mesne' tenant (pronounced 'mean') and the ladder of interest is below.

Head landlord (owner) > Mesne Tenant (R2R operator) > Subtenant (occupier)

Generally, when a mesne tenancy ends, the subtenancy also ends and the head landlord is entitled to get the accommodation back with no-one living it.

If the mesne tenancy ends, the head landlord can evict the subtenant quite easily. 

In these circumstances they will be regarded as a trespasser and the head landlord doesn't need a possession order to evict.

Green Homes Voucher Not full cost and NOT your choice

 On 8^th July Chancellor Rishi Sunak announced the £2 billion Green Homes Grant Voucher Scheme (GHGVS) which allows eligible households in England to receive vouchers worth up to £5,000 to spend on various green initiatives in the home, landlords can apply for a voucher from the government that will pay for at least two-thirds of the costs of hiring tradespeople to improve the energy efficiency of their home.

Only tradesmen who are registered with either TrustMark and Microgeneration Certification Scheme (MCS) will be eligible to carry out the works.

Landlords will not be provided the voucher directly, instead the voucher will be offset against the final bill from the tradesmen.

The grant aims to cover the costs of 66% (two-thirds) of any work completed that meets the requirements. For instance, for the installation of Cavity wall insulation costing £2,000, you could potentially expect to receive a £1,333 voucher to help towards the costs, leaving the landlord to pay £667.

The home improvements are split into two categories, Primary and Secondary.

Primary Measures

·         Insulation:  Solid wall, Cavity wall, under-floor, loft, flat roof, room in roof, park home.

·         Low carbon heat: Air source heat pump, ground source heat pump, solar thermal

Secondary Measures

·         Draught proofing

·         Windows and doors: Double/triple glazing (where replacing single glazing), secondary

       glazing (in addition to single glazing), upgrading to energy efficient doors (where

                replacing doors installed prior to 2002).

·         Heating controls and insulation: appliance thermostats, hot water tank thermostats,

hot water tank insulation, smart heating controls, zone controls, delayed start

thermostat, thermostatic radiator valves

 

In order to be eligible for a secondary measure at least one of the qualifying Primary measures must have been installed, the secondary measure will also receive a voucher but only to the equal value of the Primary measure installed.

For example: Primary measure is £2000 loft insulation, then the secondary measure can cost up to £2000 and not the full £5000.

Top up of existing measures are also allowed (e.g. additional loft insulation up to the recommended level, solid wall insulation for other walls where a wall has been previously insulated), but replacements are not included.

To be eligible to apply for a voucher you must meet one of the following criteria

• ·         All owner-occupied homes (including long-leaseholders, shared ownership)
• ·         Landlords of private rented sector domestic properties
• ·         Landlords of social sector domestic properties (including LA owned homes)
• ·         Park home owners (for residential sites including Gypsy and Traveller sites)

In addition to this, the government have extended the scheme to allow a £10,00 voucher which will fully fund improvement measures for those on low-income, however this low-income scheme is only available to owner-occupiers on a qualifying benefit.

How can you apply?

Later on this month (August), homeowners and landlords will be able to go the Simple Energy Advice (SEA) website and get advice about which energy saving measure would suit them best.

Landlords cannot decide which measure to use, this will be decided by SEA and the application will be done via SEAs website ONLY

You'll then be sent a list of TrustMark or (MCS) registered tradespeople (schemes which list approved construction workers by the government) in your local area to carry out the work, the Government will hand out vouchers from the end of September.

SCAMS

Be wary, a number of website have been set up already stating that you can claim your Voucher through them, this is not the case voucher application is ONLY available via Simple Energy Advice (SEA) website, also if you've been called saying you're eligible for a Green Homes Grant this is fake. Fraud prevention scheme Cifas says it's received reports of scammers trying to con people out of money by pretending to be part of the scheme.

Link to Government guidance 

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/906544/ghg-additional-information.pdf?fbclid=IwAR1SIQ78Y6nbytoywhUTG-PSGGk15hzNm5uQhmXHqLt8EDRL4yl2jHOYA84

 

It was acceptable in the 80s - But why do we still not understand S21?

S21 not a real eviction

 In 1988 a new Housing Act gave us what we know today as an Assured Shorthold tenancy or AST and created the provision of Section 21 notices, this provides the opportunity for landlords to evict  tenants from the property even if the tenant has not breached the terms of the tenancy agreement.

 

Commonly referred to as The No Fault Notice, S21 became the go-to notice of choice for landlords and provided a much simpler way to remove a tenant from a property, requiring a notice of 2 months and then a court order.

Prior to January 1989, landlords could serve a Notice to Quit under the Rent Act 1977 but would be required to prove one of the 20 Cases ( we would now refer to as grounds) had been breached in order for the court to award the possession.

 

The S21 did not require the landlord to wait for the tenant to make a mistake or default on rent payments.

In addition  Section 21 of the Housing Act guaranteed the landlord would get the eviction by making the no fault notice a mandatory ground, meaning a judge had no option but to award the requested eviction.

 

At the time, this was a revelation for landlords who had previously only had  protected and statutory tenancies to issue to tenants who in turn had the right to stay in a property they were renting, almost indefinitely and could even pass it on to relatives in the event of their death.

The Tory Government at the time saw that this system was disincentivising homeowners to let out their properties, contributing to a housing shortage.

The private rental sector, at this time, accounted for only 8% of homes, stark contrast to 1918 where 78% of housing was privately rented.

 

But over 30 years on from this landmark change in legislation, how many landlords and letting agents alike truly understand the meaning and use of Section 21?

 

The most common misconception is that a S21 notice is in fact an eviction warrant and tenants are expected to vacate once the notice expires.

Many landlords will gamble the completion date for the sale of a house on the expiration of a section 21, more often than not losing the sale when the tenant stays put.

 

As will any business, it is as important to understand how to end a contract as it is to enter one.

 

Key Points of a Section 21

 

It is NOT an eviction warrant – A S21 is merely an informative letter set out in a prescribed format, advising the tenant that once from the end date of the letter a landlord may apply to court for a possession order.

Tenants do no have any legal reason to leave when a S21 expires – A tenancy can only be ended by the tenant ( Notice to quit) or a Court. When the S21 expires, that is simply the next step date for when a landlord can apply to court for possession.

Tenants do not have to leave.

Possession order if NOT an eviction – Once a court has granted the possession order for the property, this commonly gives a tenant 14 days to vacate the property, HOWEVER, from a legal stand point the tenant still does not have to leave the property.

Only an eviction warrant – Tenants only have to legally vacate a property once a bailiff attends and carries out the eviction, at this point changing the locks and handing the keys, the possession, back to the landlord.

 

It is important to remember that although a S21 carries less admin to issue than a S8, its process can actually take longer and be more costly, as rent arrears cannot be claimed when using a S21 because this is a NO FAULT eviction, meaning a separate claim for arrears will need to be submitted at additional costs.

 

With so much additional regulation surrounding how and when a S21 is served and its validity so easily forfeited

It is extremely important that landlords and agents understand the basic laws of renting privately and look at the practical more cost effective and swifter options available other than S21.