The Deregulation Act 2015 (the “Act”) received Royal Assent on the 26 March 2015 and amended provisions in both the Housing Act 1988 (“HA 1988”) and the Housing Act 2004 (“HA 2004”).
The Act introduced a number of new rules that landlords and/or their agents must comply with when dealing with a tenant of a residential property let on an assured shorthold tenancy (“AST”) basis. These new rules must be carefully considered as they not only relate to the protection of a tenant’s deposit but also restrict a landlord’s ability to terminate an AST in accordance with Section 21 of the HA 1988.
The Act covers a number of matters, but this note is limited to: changes to the legislation governing the protection of a tenant’s deposit; a landlord’s ability to terminate a tenancy following a tenant’s complaint (otherwise known as retaliatory evictions); and the form, content and service of a notice pursuant Section 21 of the HA 1988 (a “Section 21 Notice”).
Those provisions contained at Sections 30 – 32 of the Act (i.e. those relating to tenancy deposits) apply to residential properties in both England and Wales. The new provisions contained at Sections 33 – 40 of the Act (i.e. those relating to retaliatory evictions and Section 21 Notices) apply to residential properties in England only.
Tenancy Deposits
Commencement: The parts of the Act relating to tenancy deposits (sections 30, 31 and 32 of the Act) came into force on the 26 March 2015.
In accordance with the HA 2004, it is compulsory for landlords to register any deposit taken from a tenant, in relation to an AST created on or after the 6 April 2007, with one of the three government backed Tenancy Deposit Schemes (“TDS”). The landlord has to register the deposit with the TDS within 30 calendar days upon which it is received and must return the deposit within 10 calendar days of the parties agreeing how much should be returned.
Under the HA 2004, landlords are also required to comply with a number of initial requirements, when dealing with a tenant’s deposit, this includes the need to provide their tenants with certain prescribed information within 30 days from the date of receipt of the deposit. The prescribed information included generic information about the TDS and specific information about the deposit and the tenancy under which it was paid (the “Prescribed Information”).
Failure to comply with those provisions of the HA 2004 would result in sanctions for non-compliance, such as fines, and would also mean that any Section 21 Notice already served would be invalid.
Since the HA 2004 there have been a number of cases which have, to a degree, muddied the waters for landlords. For instance, it was previously understood that the rules regarding deposits applied to ASTs that commenced on or after 6 April 2007 but after the Court of Appeal decisions in Superstrike v Rodrigues[1] and Charalambous v Ng[2] it appeared that the legislation applied, to a degree, to tenancies that started before that date as well.
The Act has provided some much needed clarity for landlords. The impact of the Act however differs depending upon whether the deposit was taken before or after the 6 April 2007.
Pre 6 April 2007
There are two possible scenarios here: (A) the landlord took a deposit in respect of a statutory periodic tenancy which also started before the 6 April 2007; or (B) the landlord took a deposit in respect of a statutory periodic tenancy which started after the 6 April 2007.
A.If a landlord took a deposit on an AST before the 6 April 2007, and they continue to hold that deposit in respect of a statutory periodic tenancy which also started before the 6 April 2007, then they do not need to protect the deposit.
There will be no financial penalties for failing to protect the deposit but if the landlord wants to re-gain possession of the property using a Section 21 Notice they must first pay the deposit into a tenancy deposit scheme and provide the tenant with the Prescribed Information.
B.If the landlord took a deposit on an AST before the 6 April 2007, and they continued to hold that deposit in respect of a statutory periodic tenancy which started after 6 April 2007, then they must protect the deposit within an authorised TDS and provide the tenant with the Prescribed Information.
The Act has retrospective effect, but it also provided landlords with a 90 day period in which to comply with the above requirements. This period of grace however ended on the 23 June 2015 and there may be a number of landlords who have still failed to protect their tenant’s deposit with one of the TDS.
If a deposit was not protected by the 23 June 2015 then any Section 21 Notice already served will be ineffective and any future Section 21 Notice cannot be served until the landlord has taken the appropriate remedial action. Rather than pay the deposit into the TDS late the landlord must return the deposit to the tenant in full and then serve a Section 21 Notice on the tenant.
The tenant will also be entitled to make a penalty claim of one to three times their deposit under Section 214 of the HA 2004 if the landlord has failed to protect their deposit. However, claims for penalties under Section 214 of the HA 2004, in respect of deposits received before 6 April 2007, will fail if the landlord has repaid the deposit (in full or with agreed deductions) to the tenant.
Post 6 April 2007
If the landlord took a deposit in respect of an AST after the 6 April 2007 then they should have already protected the deposit in an authorised tenancy deposit scheme and provided the Tenant with the Prescribed Information.
In such circumstances, and provided that; the landlord and the tenant are the same; the premises let are the same or substantially the same; and the deposit is still held within the same authorised scheme, the landlord will not need to re issue the Prescribed Information on future renewals of the AST or where the AST becomes a statutory periodic tenancy.
Any applications for penalties under Section 214 of the HA 2004, for deposits received on or after 6 April 2007, will also fail if they are brought on the basis that the landlord failed to ‘re-protect’ the deposit.
Summary
The Act has provided some much needed clarity for landlords when dealing with a tenant’s deposit and also helps to clear up what remedies are available to tenants should their landlord breach their obligations under the HA 2004.
To a degree the Act assists landlords, with regards to those deposits received after the 6 April 2007, as the Act makes it clear that landlords will not need to re-protect a deposit or re-serve the Prescribed Information when a tenancy, which post-dates the 6 April 2007, is renewed or when a statutory periodic tenancy arises.
The Act however also makes it clear that should a landlord fail to comply with their obligations under the HA 2004 then any Section 21 will be invalid and the tenant may make a penalty claim under Section 214 of the HA 2004.
Retaliatory Evictions
Commencement: Those parts of the Act relating to retaliatory evictions (Sections 33 and 34 of the Act) came into force on the 1 October 2015.
The Act provides some protection for tenants from retaliatory evictions by restricting a landlord’s ability to serve a Section 21 Notice in circumstances, where the tenant has complained about the condition of their premises and the landlord fails to respond, fails to provide an adequate response or serves a Section 21 Notice on the tenant.
If a tenant makes a written complaint to the landlord (or the landlord’s agent) about the condition of a property the landlord has 14 days to respond and to provide an adequate response. If the landlord fails to respond or serves a Section 21 Notice the tenant can complain to their local housing authority (“LHA”). Whilst the Act states that the tenant’s complaint must be in writing it makes it clear that the rules will still apply if the tenant does not know the landlord’s email or postal address or if the tenant made every reasonable effort to try and notify the landlord of their complaint.
The LHA has, pursuant to the HA 2004, the duty and power to investigate certain health and safety issues within a property and compel the landlord to remedy them. Should the LHA deem the property to be ‘hazardous’ the LHA may serve on the landlord an enforcement notice, requiring rectification of the hazard.
If the LHA serves a notice on the landlord, the landlord cannot serve a Section 21 notice on the tenant within six months of the date when the notice was served on the landlord or six months from the date when the operation of the notice has been suspended. Furthermore, any Section 21 Notice already served will be rendered ineffective and no further notice can be served for a further six months.
There are some limited exemptions, including:
1Where the condition of the property, or common parts, is due to a breach of the tenant’s duty to use the premises in a tenant like manner;
2Where, at the time of the Section 21 Notice, the property is genuinely on the market for sale;
3Where the landlord is a private registered provider of social housing; or
4The premises were charged before the grant of the tenancy and the mortgagee wishes to exercise its power of sale and at the time of the Section 21 notice is given requires vacant possession to exercise its power of sale.
Summary
It is imperative that a landlord responds to a tenant’s complaint about maintenance or the condition of the property within 14 days of any complaint, and that the landlord provides a satisfactory response by setting out the action the landlord intends to take and a reasonable timescale within which this action will take place. Failure to do so may result in the Landlord being unable to remove the tenant.
Section 21 Notices
Commencement: The part of the Act relating to the form of a Section 21 Notice (Section 37 of the Act) came into force on the 1 July 2015. Those parts of the Act relating to the content and service of a Section 21 Notice (Sections 35, 36, 38, 39, 40 and 41 of the Act) came into force on the 1 October 2015.
The Act has introduced a number of new rules regarding the form, content and service of a Section 21 Notice. The changes only apply to ASTs granted on or after 1 October 2015 and are not mandatory for ASTs in existence before that date, or for statutory periodic tenancies arising after 1 October 2015 pursuant to a tenancy granted before that date. However, from 1 October 2018, the new rules will apply to any AST irrespective of when it was created (except for the requirement for the landlord to provide prescribed information about the rights and responsibilities of the landlord and the tenant under the AST).
Form 6A.
The Act enabled the Secretary of State to make regulations that prescribe the form of a Section 21 Notice. Accordingly, The Assured Shorthold Tenancy Notices and Prescribed Requirements (England) (Amendments) Regulations 2015 (SI 2015/1725) sets out the new prescribed form of a Section 21 Notice[3]. This new form is supposed to simply the process for landlords and also reduces the scope for error. It must be used when ending any AST granted on or after the 1 October 2015.
Timing
A landlord will only be able to serve a Section 21 Notice once the tenant has resided in the property for at least four or more months. In the case of ‘replacement tenancies’, i.e. a new tenancy but with the same parties, the relevant period is four months from the date on which the original tenancy began.
Content
A landlord will no longer need to specify the last day of the tenancy as the date on which the tenancy will come to an end. However, the date given must still not be earlier than two months from the date on which the notice is given.
Pre Requisite Obligations
The Act has inserted a new Section 21A into the Housing Act 1988 under which a Section 21 Notice cannot be served until the landlord has complied with certain statutory obligations.
A Section 21 Notice will be rendered ineffective if the landlord is in breach of any legislation that relates to; the condition of the property; the health and safety of any tenants; and the energy performance of the property. This means, for instance, that a landlord has a statutory obligation to provide their tenants with gas safety and energy performance certificates. Should a landlord fail to provide their tenant with a gas safety certificate any Section 21 Notice will be rendered ineffective.
Prescribed Information
Before serving a Section 21 Notice the landlord must provide the tenant with certain prescribed information relating to the rights and responsibilities of the landlord and the tenant under an AST, including a copy of the Department For Communities and Local Government booklet, ‘How to rent, The checklist for renting in England’[4].
Rent Rebate
The tenant has a statutory right to claim a rent rebate, calculated on a daily basis, in respect of any period falling after a section 21 notice bring a tenancy to an end and the tenant has vacated the property.
Order for Possession
The Act has also restricted a landlord’s ability to apply for an order of possession. In accordance with the Act any claim for possession must be started within six months from the date the Section 21 Notice was given. If a Section 21(4) Notice is given (in respect of any statutory periodic tenancy) the landlord must make a claim for possession within four months from the date of expiry of the notice. If the landlord fails to do so they will need to serve a new Section 21 Notice.
Summary
It is imperative for landlords to comply with the amended procedure regarding Section 21 Notices if they wish to terminate a residential tenancy. Failure to do so will mean that any Section 21 Notice already served will be invalid and the landlord will be unable to terminate their tenancy in accordance with Section 21 of the HA 1988.
Conclusion
Whilst the Act is intended to simplify matters, and reduce the scope for error, landlords will need to be aware of the impact the Act will have on their duties to protect a tenant’s deposit and their ability to terminate an AST.
We can provide advice and assistance to ensure that the landlords comply with their obligations under the Act.
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