In 1989, the private sector housing market was altered by the introduction of the Assured Shorthold Tenancy (“the AST”). Since 1997, the AST has been the default agreement between residential landlords and tenants.
The significance of an AST is that it can be terminated by a landlord without any fault on a tenant’s part. Under s21 of the Housing Act 1988, 2 months’ notice is required to do so. Without s21, a landlord would have to prove grounds for recovering possession, potentially having to test those grounds at a trial, which may cost several thousands of pounds.
A buy-to-let market has developed, making people become landlords who previously never would have been, to supplement their income, or act as an alternative to a pension.
ASTs are ubiquitous. If someone is in rented residential accommodation at the moment, then chances are that they are in a 6 month AST.
ASTs give flexibility to landlords and tenants, but no security to tenants. At practically any time, a tenant can be served with a s21 Notice, which, if completed correctly, ultimately means that they will have to move home shortly.
And now there is a whole generation who expect to be tied in as tenants with no hope of ever owning their own home; the housing divide has increased.
On 21 July 2019, the government released the Consultation: A new deal for renting: resetting the balance of rights and responsibilities between landlords and tenants. Any residential landlord ought to read the Consultation.
As a Consultation, it is obviously not law, but its contents make its intentions clear. Section 21 of the Housing Act 1988 will be repealed. The Consultation is not intended to result in a decision about whether to repeal it or not, only about how to deal with the (massive) consequences. Because if the consequences are not dealt with, the repeal of s21 will move the market back to where it was before 1989, where some tenants are, practically, tenants for life. This is not what the modern buy-to-let owner intended to end up with.
It will not be a retrospective change; existing ASTs will remain ASTs, until they naturally expire. It is not clear what will happen to tenants that hold over after fixed terms.
It seems likely that the current grounds for possession will be expanded, probably to include a new ground that allows a landlord to terminate a tenancy if they genuinely intend to sell, and another to increase a landlord’s ability to move into their property. Exactly how the Consultation will end is yet to be determined, particularly with a new government.
For now, our best advice is to be cautious about entering the buy-to-let market, or purchasing a property that is subject to a tenancy. And for anyone who decides to do so, make sure that they have the correct paperwork.
We are able to draft agreements, draft and serve notices and issue proceedings if tenants refuse to vacate. With all the changes expected, Nalders are up to date and are Cornwall’s foremost firm specialising in Landlord and Tenant disputes.