The Government has announced that they intend to abolish the no-fault eviction ground for Landlords under section 21 of the Housing Act 1988.
This (if it happens, which sounds probable – as the Labour party have similar plans) will be a major shakeup of the private rented system and could affect the future of housing and housing supply significantly.
I propose to write a series of posts on this blog exploring the various aspects of the proposals to remove the section 21 eviction process and look at the positive and negative aspects. However, in this very first post in the series, we will be looking at
The Background to Section 21
This will involve looking at the history of the Private Rented Sector (PRS), much of which is lost and forgotten in the mists of time. So maybe it is time to remind ourselves of our past.
As you will see, section 21 has played a major part in the development of our current system.
So let us first look at:
The Early Legislation
Before the 1914-18 war, most people lived in rented accommodation (around 80% of households) and the system was largely unregulated. Tenancies were governed by the common law rules which included the rules for ‘notices to quit’ and forfeiture.
Landlord and tenant regulation really began as a result of problems which arose during the first world war. Because of shortages of housing in key locations, local landlords were able to increase rents significantly which caused big problems for politicians.
On Clydeside for example strike action was threatened. As the government had no alternative sources for social housing or any schemes for helping to meet people’s housing costs, the only alternative available to them was to bring in legislation to restrict landlords rights to set or alter rent levels.
To prevent landlords from getting around this by demanding a premium or ‘key money’, this also was outlawed, and tenants were given security of tenure.
After the ‘Great War’
This legislation was only ever intended, at the time, to be a temporary emergency wartime measure and not a long term intervention in the freedom of landlords and tenants to contract. It only applied to rented dwellings which fell below defined net rateable value limits and thus was only intended to protect the poor. (Note – prior to Council Tax, the system for local taxation of property was based on ‘rateable values’).
However after the end of the 1914-18 war, social and political pressures resulted in the original legislation being retained as Government could not afford, politically, to repeal it. During the next 40 years, there was considerable amendment but no real repeal.
The outbreak of the second world war led to a wider range of dwellings being included in the legislation and by 1953 it was estimated that over 90% of dwellings fell within the rateable value limits and most unfurnished tenancies were within the scope of the legislation.
Decontrol and its aftermath
In the 1950s some attempts were made to decontrol the private rented sector. The Housing Repairs and Rent Act 1954 put new and newly converted dwellings outside rent control. Then the Conservative government’s Rent Act 1957 decontrolled all dwellings with a rateable value of more than £30 (£40 in London) at once and provided for other dwellings to be decontrolled when they became vacant.
This led to difficult social and political problems with allegations of landlords ‘encouraging’ tenants to move out, especially in areas of high housing demand. The most notorious of these was, of course, Peter Rachman – which led to the phrase ‘Rachmanism’ meaning exploitation and intimidation of tenants by unscrupulous landlords.
As a result of this, the Milner-Holland Committee was set up to look at, in particular, the effects of the de-control legislation on the housing market in London.
In 1964 a new Labour government was elected led by Harold Wilson (pictured). This government was essentially responsible for the protective regime which lasted for the next 25 years.
The first act to be passed was the Protection from Eviction Act 1964. Followed by the Rent Act 1965. These introduced the following new concepts and measures:
- Harassment – the 1964 act was the first act to make the act of harassing a tenant into leaving a property a criminal offence
- Due process – this is the concept that landlords must obtain a court order for possession, if tenants stay beyond the contractual tenancy period, before they can recover physical possession. This rule applied to all tenants, not just those falling within the scope of the Rent Acts
- Notices to Quit – these now had to give at least four weeks, irrespective of the term of the tenancy
- Fair rents – instead of inflexible rent controls based on tightly defined statutory formulae, rent levels were to be fixed at a ‘fair’ level which reflected market rent but discounted any inflation for housing shortage. Any appeal was to the Rent Assessment Committees (now replaced by the First Tier Tribunal) and fair rents could be reviewed every two years.
These changes not only affected more properties (as the applicable rateable value was widened to £200 (£400 in London), but were also, for the first time, intended to be permanent.
The Rent Act 1974
This act introduced the following developments:
- Furnished accommodation was now brought within the Rent Act scheme
- Resident landlords – this was a new concept – landlords who lived in the same building (other than a purpose built block of flats) were not subject to the Rent Act regime, but a less stringent regime called ‘restricted contracts’.
- Owner occupiers were given a mandatory ground for repossession if they wanted their own property back to live in, for example after a spell working abroad, so long as they followed certain procedural steps
- Succession rights – rights were introduced for spouses and family members to succeed to a statutory tenancy on the death of the tenant.
Statutory consolidation in 1977
In 1977 the Protection for Eviction Act and the Rent Act 1977 were both passed which consolidated all the earlier legislation. So now we do not need to look behind these two acts.
The impact of the legislation
The legislation was complex and not well known to tenants. So although they had strong rights, tenants did not always take advantage of them as intended.
Also, the legislation was also not comprehensive and some tenancy types were out of scope. Landlords would often try to use this to avoid the acts and evict tenants. For example by renting properties as ‘licenses’ and to limited companies as opposed to individuals.
The ‘license’ lets stratagem was knocked on the head by the 1985 case of Street v. Mountford. Company lets are still with us.
However, one major result of the legislation as a whole was the substantial reduction in the size of the private rented sector. Households living in private rented accommodation went down from about 80% in 1918 to about 8-9% at the end of the 1980s. The protective legislation introduced in the 1960s and 1970s were not the sole cause of this but they were certainly a factor.
The Rent Acts were not popular with landlords.
One landlord described them to me as ‘expropriation without compensation’ and a lot of landlords felt the same. Few property owners were prepared to allow tenants into a property if this meant the effective loss of that property for two generations (as often happened).
There were many cases where a property owner allowed someone to live in a property for what was supposed to be a limited period of time (or in one case that I know of, just for a holiday) only to find that they were stuck with them as tenants for decades.
There was also the problem of low rents. The ‘fair rents’ were supposed to reflect the market rent. But as over time, there were no genuine market rents, the fair rent levels drifted down and down.
Landlords, therefore, had little incentive (and often could not afford) to keep properties in good condition and many property conditions deteriorated seriously as a result of this.
In 1979 Mrs Thatcher’s conservative government swept into power and ushered in a period of profound change for housing. She was determined to increase the supply of private sector rented housing and to use legislation for this end.
Almost before the removal vans had left No 10, a draft bill introducing what was to become a new form of tenancy was winging its way through Parliament. The Housing Act 1980 introduced the concept of the shorthold tenancy – a form of tenancy where, provided a certain procedure was followed carefully, a Judge had no option but to make an order for possession.
This concept was redeveloped and made more mainstream in the Housing Act 1988 which introduced a new type of tenancy for all private lettings starting after 15 January 1989 – the assured tenancy and its relative, the assured shorthold tenancy. The main difference between the two being the right for landlords of assured shorthold tenancies to evict tenants without giving a reason provided they followed the procedure set out in section 21 of the act.
This new legislation though, did not immediately result in the buoyant private housing sector we have today. It took some time for landlords to fully appreciate the new rights that they had under section 21.
The property crash which started in 1988 also inhibited things for quite some time, and it was not until the introduction of the buy to let mortgage launched by ARLA in about 1995 that the PRS started to take off.
Initially, the assured tenancy was the ‘default’ tenancy – which in many ways was similar to the old ‘protected tenancies’. However, by 1996 and the passing of the Landlord and Tenant Act of that year, we were sufficiently familiar with the concept of assured shortholds for it to be made the default tenancy type.
From that time onwards the private rented sector continued to grow and develop. Section 21 has been enormously important and in many ways is the author of the modern PRS.
- Landlords feel secure when renting property to tenants as they know they can get it back again – unlike the situation under the Rent Act 1977
- Mortgage lenders are prepared to finance a property purchase where the purchaser will not be living there themselves, again because of the protection provided and the ultimate right to recover possession under section 21
More recent developments with section 21
These will be looked at again in later posts, but in order to complete the story, we should cover them briefly here.
The development of Section 21 Pre-Requites
Initially, obtaining possession under section 21 was fairly straightforward. The landlord had to serve a notice giving not less than two months notice and apply to the court for a possession order. The main challenge for landlords was getting the notice correctly drafted.
The government then started including pre-requisites, the first being
- That a deposit (if paid to the landlord) must be properly protected in a government authorised tenancy deposit scheme and
- The prescribed information served, both of these within 30 days of payment of the money, and
- That licensable Houses in Multiple Occupation (HMOs) must have a valid license
Many landlords fell foul of these rules, in particular, those requiring protection of the deposit.
Then, new rules were introduced (in England) via the 2015 Deregulation Act, including
- The need to serve a valid gas safety certificate and EPC certificate, and
- The Governments ‘How to Rent’ booklet giving guidance to tenants, and
- New rules about timing and
- A new prescribed form
Again, many landlords fail to comply and are unable to obtain their possession order as a result.
However, despite this protection, section 21 has been so misused by some landlords, that is is now regarded by many as ‘evil’
Why section 21 is regarded as Evil
By now, the PRS has expanded enormously, partly due to the sell-off of social housing under the ‘right to buy’ and partly due to the massive increase in house prices – meaning that many cannot afford to buy their own home.
So the Private Rented Sector now includes more families and older people who in the past might have been home-owners.
These people feel particularly threatened by the fact that their security of tenure is no longer than the remainder of their fixed term or two months, whichever is the longer.
Sadly, due to the chronic non-enforcement of housing legislation by the authorities, many rogue and criminal landlords have entered the sector. These will terrorise tenants, and hold the threat of a section 21 eviction over their heads if they dare to complain about the poor condition of their properties.
Most of their tenants feel they have no choice but to accept this as often they would find it hard to find somewhere else to rent.
Even non-criminal landlords will use section 21 sometimes to evict tenants who have done no wrong. Which means that many tenants do not feel secure in their homes and feel unable to put down roots in the community. This can be particularly damaging for families with children.
Proposals to end section 21
And so the wheel has come full circle and it is proposed to remove the right for landlords to evict without a reason.
This proposal raises many issues, some of which have been flagged up but not considered fully, in this article. I hope though that it will provide a useful background to the discussions which will now be taking place.
I will be looking at various issues regarding the ending of section 21 in this series of posts.