The End of Section 21 – Possession Claims based on Rent

If removing section 21 is going to work it is clear that improvements have to be made to the eviction process. The government have acknowledged this.

So what improvements could be made?

In the next few posts, I will be looking at the various reasons landlords seek possession and seeing if they can be improved and if so how. Starting with possession claims based on rent.

The most common ground?

I don’t have any statistics on this but I would be prepared to bet (if I were a betting person, which I am not) that the majority of claims for possession brought by landlords are based on the non-payment of rent.

Tenants falling into arrears is also the thing most landlords fear the mosst. Many people, particularly tenants, think of landlords as ‘rich people’ but in reality, most of them are not particularly rich. Reasonably well off maybe but not RICH.

Being a landlord costs money.

You have to pay:

• Your mortgage.  If the property has been purchased with a mortgage loan.  Which many have.
• For maintenance. Landlords are responsible for maintaining the property and keeping it ‘fit for human habitation’ – save for damage done by the tenant which does not comprise ‘fair wear and tear’. But even for that most landlords will often end up paying a substantial part if not all. For example, if tenants leave the property in poor condition when also owing rent. The deposit will normally not be enough.
• For regular checks and inspections. Landlords with gas properties will need to pay for the annual gas safety inspection and in the not too distant future will be required by law to have electrical safety checks done too.
• Letting agents fees. This can be between 8 – 20% of your rental income, plus. This is likely to increase as with the loss of tenant fees from 1 June agents will look to charge the real cost of their work to landlords.
• Other membership fees. For example for landlord associations, accreditation schemes and support services such as my Landlord Law service,
• License fees. Many properties are HMOs and will need to pay HMO license fees to the Council. Many non-HMO properties will also incur ‘selective license’ fees in areas where the Council have imposed them on all landlords.

I am sure I have missed some fees out (let me know of any in the comments) but you can see that this is a fair amount. They still have to be paid, even if the tenant is not paying rent.

If you are, say, a pensioner whose rental income forms your main income, then if your tenant stops paying rent this could cause considerable hardship.

Problems with the current system

I should say here that the section 8 eviction procedure based on rent arrears does ‘work’. When I did eviction work I often used it and in most cases my landlords got their possession order.

However. There are issues that can arise:

• Tenants paying off the rent – or just enough to bring the possession order down to under the two months needed for a ‘mandatory ground’ for possession – just before the hearing.
• False counterclaims – Tenants pitching up at court and claiming that the property is in poor condition and that they are entitled to compensation (which would then offset the arrears). If no notice has previously been given of any disrepair the counterclaim should be chucked out, but many District Judges, desperate for time to deal with the rest of their massive list of cases, will adjourn the case to another hearing. Effectively giving the tenants a few more months to live in the property rent free
• False challenges to the arrears figure – Tenants pitching up at court and claiming that they have actually paid the rent and that there are no arrears at all – again, this may result in an adjournment allowing tenants a further rent-free time in the property
• Massive delays before the case is listed for hearing. All rent arrears cases require a hearing. Cases are supposed to be listed within 4 to 8 weeks after issue but the pressure on the Courts (remember many have now been closed, increasing pressure on the others) means that this is often impossible.
• Massive delays in getting a bailiffs appointment. In many areas, this can be two to three months – a further time for the tenant to live rent-free in the property.

Bear in mind that in most cases where tenants are evicted for rent arrears, the landlords never recover the unpaid rent. Most never even try. You cannot get blood out of a stone or rent from someone who has no money.

Most landlords use section 21 for rent arrears situations because (provided they have complied with all the rules) the tenant cannot put in a valid defence and they know that the process will be over within four to six months.

So how could things be improved?

Claims based on rent arrears are probably the easiest to reform. The things the new system should deal with are:

• Reducing delay for cases where rent is not being paid, while
• Allowing tenants an opportunity to sort things out if this is going to be possible.

It has been suggested that ground 8 be changed to make the rent arrears 4 weeks or 1 month (as opposed to 8 weeks and 2 months as now) but give tenants a longer notice period – say 4 weeks/ 1 month to clear them before proceedings can be issued. Which sounds like an excellent idea.

It would allow tenants more time to sort things out if this is going to be possible.

However, if the rent is not paid, the proceedings should then move swiftly.  It is a fact that in the majority of cases tenants do not defend and do not attend at court.  So listing it for hearing is a waste of time.

I would suggest something along the following lines:

• An online process similar to the current accelerated procedure for section 21
• The landlord to obtain a possession order automatically if no defence is filed within 14 days
• The date for possession to be adjourned for 28 days
• The tenants to have the right to avoid possession and have the order discharged if they can prove that they have paid all the rent plus fixed costs to the landlord during that time
• After the 28 days, the landlords to be entitled to instruct bailiffs
• The Judge to be able to grant the tenant a further 14 days on an application for a stay of execution but only in cases of genuine hardship OR where the tenant can show that they have a reasonable prospect of clearing the arrears + fixed costs within that time.

So if the tenant paid no rent, and assuming the bailiffs could arrange an appointment within 14 days, the landlord would be able to recover possession hopefully within about 3-4 months. Or get their rent paid.

If the tenant has a genuine defence

If the tenant files a defence at court within the time frame, the case can be set down for hearing but only if:

• They are able to provide evidence of payment of the rent (eg receipts, copy bank statements etc), or
• They are able to provide evidence to show that they have a genuine counterclaim. For example, evidence to show the property is in poor condition.  This could be conditional upon the tenants paying an application fee to the Court.

The defence and filed evidence to be assessed by a District Judge as part of their box work when they come to consider the application.  At that stage (as now with accelerated procedure claims) they can either

• Make the possession order, or
• Set the case down for a hearing

If at the hearing the tenants lose their case, then if the arrears have not been paid, the order to entitle the landlord to instruct the bailiffs immediately for an appointment on the first available date after 7 days.

For this to work there would HAVE to be improvements to the bailiff’s system. There are proposals to outsource this to the private sector and/or the Sheriffs / High Court Enforcement Officers and this could work.

Conclusion

These are just a few ideas knocked up one morning while sipping my coffee before starting work. You may pick holes in them, and there may well be better solutions ‘out there’.

However, if landlords are not to leave the sector in droves there HAS to be a proper way of enforcing the landlord’s right to receive rent. Otherwise, there is not a lot of point in being a landlord at all and many landlords will opt to sell up and invest their money elsewhere.

The buildings will of course still be standing so overall residential accommodation will not be reduced. But those properties will no longer be available to people looking to rent. Which could cause considerable hardship. And discontent among renters.

Something no doubt the government will be keen to avoid.