The End of Assured Shorthold Tenancies?

Assured Shorthold Tenancies (“ASTs”) are the most common arrangement upon which landlords let private residential properties in England. One of the main advantages is the ability for a landlord to serve a “no fault” Section 21 Notice giving 2 months’ notice to terminate an AST at the expiry of the fixed term or during the term if there is a break clause.

The Government has launched a consultation with a view to banning “no fault” notices served pursuant to Section 21 of the Housing Act 1988 (as amended) and removing the AST regime in its entirety.

The current position

Letting properties under ASTs has become increasingly regulated in recent years. Whilst many of the regulations which have been brought into force are aimed at attempting to combat the activities of “rogue” landlords, private landlords have faced increasing management, administration and costs to ensure compliance with the legislation.

There are a number of conditions enshrined in legislation with which a landlord must comply otherwise it will be unable to serve a valid Section 21 Notice. A landlord would be unable to serve a valid Section 21 Notice in the following circumstances:

• Failure by the landlord to protect the tenant’s deposit within an approved tenancy deposit scheme within 30 days and failure to comply with the legislation surrounding tenancy deposits;
• Failure by the landlord to provide the tenant with a gas safety certificate prior to the commencement of the tenancy;
• Failure by the landlord to provide the tenant with an energy performance certificate prior to the commencement of the tenancy;
• Failure by the landlord to provide the tenant with the Government’s prescribed form “How to Rent Guide” prior to the commencement of the tenancy;
• Failure by the landlord to use the prescribed form Section 21 Notice;
• If the property is in an area where selective licensing applies and the landlord fails to hold a valid licence;
• As a retaliation to tenant’s complaints of serious disrepair where the local authority serve an enforcement notice;
• For new ASTs created after 1 June 2019, if the landlord has accepted a payment prohibited by the Tenant Fees Act 2019 and has not returned it to the tenant; and
• If the landlord seeks to serve a Section 21 Notice to bring the tenancy to an end prior to the expiry of the first 6 months of the tenancy.

Notwithstanding the increased regulation surrounding Section 21, service of a Section 21 Notice is often the easiest and most cost effective way of a landlord obtaining possession of a property for whatever reason.

The proposed changes

The Government is proposing to abolish Section 21 Notices and the creation of new ASTs. This appears to be a complete ban (with no exceptions). The effect will be that private landlords will be unable to evict tenants without proving a statutory ground for possession under Section 8 of the Housing Act 1988. This is the regime of assured tenancies rather than assured shorthold tenancies. 

If a landlord is unable to establish a ground under Section 8, the tenant will have a right to remain in the property unless s/he breaches the tenancy agreement or the tenant serves notice to vacate (if permitted under the terms of the tenancy).

Landlords will be able to seek possession of their properties where a tenant is in arrears of rent or in breach of the terms of the tenancy agreement provided that the landlord can establish one of the grounds under Section 8. Some grounds are mandatory and the Court must make an order for possession where the ground is established whilst others are discretionary so a possession order may not be made even where the ground is made out.

There is a concern that the proposed changes will see a drop in the rental market with many landlords being discouraged from letting out their properties on assured tenancies due to the inability to terminate the tenancy unless the landlord can establish one of the specified grounds for the purposes of Section 8.

Those landlords who currently let their properties on ASTs may be considering taking steps to obtain possession now in order to ensure that they can obtain possession via the Section 21 route and this may lead to an increase in evictions as a result of the proposed changes. However, if implemented, the proposed changes will not be retrospective and the Government intends for them to apply to new tenancies created after the date upon which the legislation comes into force.

It remains to be seen precisely what changes are effected once the consultation has concluded on 12 October 2019, however the uncertainty may already be having an effect on the rental market.

This article was written by Tanya Pinto, paralegal. For more information please contact Tanya on +44 (0)1483 252575 or tanya.pinto@crsblaw.com.