The Coronavirus Act (CA) 2020 enacted as an emergency response to the pandemic, came into effect on 26th March 2020 and brought sweeping legal changes across England and Wales. At a time when staying home is ever more important, many are now struggling to keep afloat with plummeting earnings and increased costs of living at home. The natural response for the Government was to announce protection for renters from residential evictions. This legislation changed the landscape of successful eviction overnight by introducing enhanced notice period for the length of the interim period of 6 months till 30th September 2020. Courts too complimented the law change by announcing a moratorium on accepting possession cases. This will be worrying times not only for tenants but for landlords who risk losing income from their property.
What are the specific changes?
Regulation 29 of the Coronavirus Act 2020, stipulates the changes to the existing Housing Act 1988 and this is further reflected in the new prescribed forms – Form 6A and Form 3 used most frequently for residential evictions. Form 6A is used for the eviction under s21 HA 1988 (more well known as no-fault eviction) and Form 3 is used for eviction following 2 months of rent arrears. Both forms need to be served with specific notice before any court proceeding can be started. Form 6A required a minimum of 2 months notice and Form 3 required 2 weeks notice. Now the minimum notice for both the forms have increased to 3 months for starting eviction proceedings. : –
1. Firstly, both the Forms 6A and 3, have a new opening note – ‘This form has been changed to reflect new legislation which came into force on 26 March 2020 and should be used by landlords in England up to 30 September 2020.’. This note reiterates the time till which the current form will be applicable. Clause 1(2) of Regulation 29 of CA 2020 states that specific local authorities can further extend this time to a later date if required.
2. Secondly, in relation to Form 6A, at page 3, there is a new provision
‘You are entitled to at least three months’ notice before being required to give up possession of the property. However, if your tenancy started on a periodic basis without any initial fixed term a longer notice period may be required depending on how often you are required to pay rent (for example, if you have a periodic tenancy which is half yearly or annual, you must be given at least six months’ notice (which is the maximum)). The date you are required to leave should be shown in section 2 below. After this date the landlord can apply to court for a possession order against you.’
3. Thirdly, similar provision to the above is inserted at Paragraph 5 of Form 3 ‘Where the landlord is seeking possession on grounds 3, 4, 7B, 8, 10 to 13, 14ZA, 14A, 15 or 17 (without ground 7A or 14), court proceedings cannot begin earlier than 3 months from the date this notice is served. If one of 1, 2, 5 to 7, 9 or 16 grounds is also specified court proceedings cannot begin earlier than three months from the date this notice is served’.
Therefore, a notice of 3 months has to be given in both occasions i.e. there need to be at least 3 months from the time the notice was served on the tenant as per Civil Procedure Rules (see Certificate of Service – N215) till the issuance of a court claim.
4. The fourth big change to note is that courts have announced a moratorium on possession proceedings for 3 months from 27th March 2020 till 26th June 2020 https://www.gov.uk/government/publications/covid-19-and-renting-guidance-for-landlords-tenants-and-local-authorities. Though this is not in the body of the new Act, the court issued this announcement to compliment the legislation.
5. The fifth development is that County Court bailiffs have been instructed by Her Majesty’s Courts and Tribunal Services not to take any new appointments to execute any possession order https://www.courtenforcementservices.co.uk/coronavirus-covid-19-urgent-update-from-moj-to-high-court-enforcement-officers-following-ministry-for-housing-communities-and-local-government-mhclg-announcement-regarding-protections-t/.
What is the implication of these changes?
1. For starting no-fault s21 eviction, the implications are less profound, though proceedings will run for longer. The landlord still has to ensure, the tenancy deposit was adequately protected (if a deposit was taken) and that Energy Performance Certificate (EPC), gas safety certificate and how to rent booklet were all provided to the tenant prior to the tenancy. These usual mandatory requirements for successfully seeing the light of day in a no-fault eviction continues to be in place. The major change then appears to be the change of notice period from 2 months to 3 months. However, landlords need to be aware that even if the right notice is given, s21 is a discretionary ground, as the court retains the discretion to award the possession order. Tenants could still request for the maximum period for the order to be effective, on the ground of the Government’s guidance to not move home and exceptional hardship. Currently, that stands at 42 days. It is thereby very likely, that s21 proceedings for possession will be protracted. Not only is there the extended notice period, but there is the likely possibility that any successful possession order granted will be effective after the maximum period of 42 days.
2. The implications for section 8 proceedings for rent arrears are more pronounced. Generally, residential tenants pay rent in advance by the first week of the month. Though the pandemic was brewing from mid-February 2020 onward, the proper lockdowns did not commence until 19th March 2020. Government announcement of protection for renters was on 18th March 2020 https://www.bbc.co.uk/news/uk-51939634, and then CA 2020 cemented the position on 26th March 2020. Landlords will most likely see rent payments falling in April or the upcoming months. Therefore it is very important to plan and prepare for any eviction (to claim and defend) proceedings from now on.
3. The law requires 2 months of rent arrears as per Ground 8 of Sch 2 Housing Act 1988 to be met and that continues to remain in place. Therefore, most landlords will not have ground until June 2020. Once there are 2 months of rent arrears, Form 3 has to be served with 3-month notice. Consequently, proceedings cannot ideally commence prior to August 2020. In effect then it is possible that a tenant can apparently escape 5 months of rent at the expense of the landlord. Once proceedings commence, the court will inevitably take a few weeks to issue a notice of hearing. At the hearing, the tenants could still seek the maximum of 42 days for the order to be effective.
4. Forms 6A and 3 served prior to 26th March 2020 are not affected by the current legislation as the law does not allow for retrospective effect. However, if any pre-CA 2020 notice was due to mature within 26th June 2020, then it will be affected by the court moratorium on possession claims, and consequently, a new claim cannot be lodged until the moratorium had passed (after 26th June 2020).
5. It is notable that CA 2020 does not prescribe any moratorium on seeking enforcement of the possession order, which landlords or their representatives can seek by using form N325. This application to seek a warrant of enforcement is governed by The Dwelling Houses (Execution of Possession Orders by Mortgagees) Regulations 2010 and that law too is not affected by the new Act. However, given the instruction to County Court Bailiffs to not take any new appointments, landlords should be prepared that there will be a significant waiting period for bailiff appointments.
2020-04-0904/09/2020The best course of action
1. For landlords seeking to evict tenants by s21 proceedings, there is no further new requirement other than the 3 month notice period. Landlords should be prepared for elongated proceedings.
2. For landlords seeking to evict through the Ground 8 route for rent arrears, there is a need for a lot of diligence. Landlord and their agent should prepare rent schedules and keep records of rent received. As explained above, this will now be a much longer process.
3. For both Ground 8 and s21 proceedings, the existing legal requirements need to be met and the correct form has to be used with the right notice period. Witness statements accompanying the claim should also be as per the new Practice Direction 21 which requires a statement to indicate how it was compiled (by phone, face to face or other means). Landlords should ideally seek professional help to ensure all requirements are impeccably followed especially for s21 as this is a discretionary ground and courts will reject the claim for the slightest of inadvertent errors, causing further delay. If reasonably possible, then landlords can communicate with tenants whether they will have any exceptional hardships with the order and explore with them on whether the possession order can be effected sooner than later.
4. Once a possession order is obtained landlords or their representatives should plan to apply for a warrant of possession as soon as the order is due to be effective. This is more so if possession order is nearing its expiry. Though the County Court Bailiffs are not taking new appointments, it is better to be waiting in the queue for an appointment than to be amidst an inevitable backlog.
5. The best advice for landlords and estate agents is, however, a non-legal one. For landlords anticipating rent arrears, it is best to establish communication with tenants and to be open to negotiating rent reductions and/or deferral to the extent possible to ensure the maximum rent is coming in these uncertain times, especially if the tenant until recently had a good record. Getting a new and compliant tenant may be just as difficult to evicting a non-paying one.
6. There are new opportunities for estate agents who can prepare for virtual viewings using technology and CGI, so they are better placed to conduct viewing amidst the restrictions.
7. Estates agents will most likely note a surplus of properties seeking long terms tenants as figures for short term lets and holiday rentals continue to dip. Property experts anticipate this will decrease rental yields. Therefore planning properly with an existing tenant, can sustain a more profitable tenancy.
8. Landlords and their agents should also actively seek to communicate with their Buy-To-Let (BTL) mortgage providers. Besides providing protection to tenants from eviction, on 18th March 2020, the Government also announced mortgage holidays for investor landlords. Most lenders are therefore allowing investor landlords to get mortgage holidays up to 3 months without any adverse impact on their credit score, albeit the interest will continue to accrue. Most lenders are also allowing landlords to self-certify their need for the mortgage holiday. Taking such a holiday can allow landlords to be flexible with their tenants. These measures were introduced precisely so that landlords can pass on the benefits to their tenants and should be utilised to their fullest.
9. Tenants should not underestimate the importance of paying rent timely as they continue to be obligated by the tenancy contract. If there are genuine difficulties then the tenant must communicate with landlords and agents to seek rent reduction or deferrals. It is very important to appreciate that both CA 2020 and the court moratorium are temporary protection from eviction. However, it is not a protection against money judgements, which landlords can still seek for the unpaid rent. The government announcement may have lead many renters to believe that they do not have to give to rent, however, that understanding needs to be corrected. Landlords and estates agents can still seek money judgements against tenants and any civil judgements can severely compromise the financial health of an individual. Therefore, tenants must seek to renegotiate or vary their contractual obligations of the tenancy, than to rely solely on the current and interim law. As a negotiating tool tenant can indicate to give notice for terminating a tenancy especially if they are in their periodic term, as they are more likely to find better value for money in this period.
Prospects for residential evictions are heavily impacted by the legal changes introduced by emergency legislation. It is apparent that eviction proceedings will be lengthier consequently risking landlords to suffer greater financial consequences and tenants, grim financial health and possible homelessness. Nonetheless, there are measures which both landlords and tenants can take now to avoid evictions and secure certainty on rental payments. The new legislation gives plenty to tenants, landlords and their agents to consider for effectively dealing with residential eviction amidst the pandemic.