Section 21 of the Housing Act 1988 and the Effects of the Deregulation Act 2015

Understanding Section 21 of the Housing Act 1988: An Overview

Landlords and agents will now be aware that the Deregulation Act has received royal assent and that some parts came into force as of 26 March 2015. The Act has staged implementation dates and the new law, how it will affect landlords, and when each stage will come into force, are summarised in this newsletter.

SAVE THE DATE

Landlords have until 23 June 2015 to put any unprotected deposits received before 6 April 2007 into a scheme and to serve the prescribed information on tenants.

This period should be used to review files and identify any possible problems so that landlords can avoid future penalties.

Failing to register these older deposits or serving the prescribed information may lead to compensation claims from tenants of up to three times the deposit. A section 21 notice will also be invalidly served unless the tenancy deposit rules are complied with.

WHAT ARE THE CHANGES?

DEPOSITS

Pre 6 April 2007 tenancies:
Where a fixed term tenancy is entered into before 6 April 2007, and it changes to a periodic tenancy on or after 6 April 2007, a landlord must comply with the tenancy deposit rules within 90 days of the tenancy becoming periodic. This applies the decision in Superstrike v Rodrigues and extends the time limit from 30 to 90 days for complying with the rules.

Post 6 April 2007 tenancies:
Where a fixed term tenancy is entered into on or after 6 April 2007 and the tenancy deposit rules were complied with at that time, and the tenancy changes to a periodic tenancy and the deposit remains in the same scheme, a landlord is deemed to have complied with the tenancy deposit rules at the commencement of the periodic tenancy.

This addresses the Gardner v McCuskar decision and will give landlords and agents a much needed bit of breathing space as the prescribed information will no longer need to be re-served at the start of a periodic tenancy.

If a deposit is received on or after 6 April 2007 for a fixed term tenancy or a contractual periodic tenancy, and the deposit was protected and the prescribed information was sent out at the time, as long as the deposit remains in the same scheme when a renewal tenancy is granted or a contractual periodic tenancy replaces the original tenancy, and as long as the replacement tenancy is the same or substantially the same, a landlord is deemed to have complied with the prescribed information rules in relation to the renewal tenancy or the replacement contractual periodic tenancy.

Landlords should be aware that this does not include the protection of the deposit itself. Whether the deposit will need re-protecting in respect of the renewal or replacement contractual periodic tenancy will depend on the individual rules of each scheme.

Remember that tenants must still be given revised prescribed information about their deposit if there is a change in tenant(s), landlord(s), premises or the deposit protection scheme.

Agent details:
It has now been clarified that the agent’s details can be used on the prescribed information where they have protected the deposit on the landlord’s behalf. This resolves previous uncertainty in this area.

SECTION 21 NOTICES

In force from 1 July 2015:

Prescribed form:
The Secretary of State can require landlords to use a prescribed form for section 21 notices. There is currently no prescribed form but watch this space for further information.

In force from 1 October 2015:

Date on section 21 notice:
The new legislation endorses that a landlord need not specify within the section 21 notice the last day of a period of the tenancy as the date on which the notice expires.

Notice at the start of a tenancy:
The bad news is that a section 21 notice cannot be given during the first 4 months of the tenancy. The practice sometimes adopted of serving a section 21 a day or so after the start of the tenancy must therefore cease. This will require some careful thought as to the term of the tenancy offered at the outset.

Shelf life:
A section 21 notice will have a shelf life of 6 months and proceedings must be issued before this expiry date.

CONDITION OF PROPERTY (in force from 1 October 2015)

Section 33 of the Deregulation Act is also important for landlords and agents to be aware of as it affects the ability to serve a section 21 notice on a tenant who has made a complaint about the condition of a property.

A section 21 notice will be invalid if a tenant makes a complaint in writing to a landlord about the condition of a property, and the landlord does not provide a response within 14 days, provide an adequate response, or gives a section 21 notice following the complaint, and the tenant then complains to the relevant housing authority who serves a notice on the landlord. This may have limited effect but it is important to be aware of this change.

The Deregulation Act does contain guidance as to what constitutes an adequate response (it must set out the action that a landlord proposes to take in response to a complaint, and a timescale for doing so) but to avoid this being another avenue with which tenants can avoid possession, landlords and agents should keep on top of complaints made by tenants.

WHAT NEXT?

Immediate
Landlords have been given a grace period to protect any deposits that still require protecting and this time should be utilised effectively.

Long term
Some thought will need to go into how and when to issue a section 21 notice and this will need to be weighed against the administrative burden, particularly on agents.

Similarly, agents and landlords will need to keep track of when a section 21 notice is served, as 6 months can pass quickly where the tenant is trying to negotiate their tenancy.

If you are in any doubt as to your position we suggest you contact us for further advice.