Friday afternoon on the 4th September was a bit strange. Why? The two previous Fridays the Housing Secretary made announcements which were extremely important and had an impact on businesses across England.
It is difficult to understand why these pivotal announcements are made late Friday afternoon, one of which was the Friday before a bank holiday weekend. Would it make any difference if it were a Monday or a Wednesday? May be, may be not, however, it is important to understand that these changes require a certain element of “change management”. It is not a simple as swapping one document for another, there are quite critical points to consider.
1. Understanding the “Why” behind these changes
Cynics, conspiracies, anti-landlord bodies, we have read about the aforementioned over and over again. However, we must look at things from a different perspective - public health and homelessness. We know what we have witnessed and experienced to date, therefore the Government are thinking “worse case scenario” and the possibility of a second-wave over the winter months. Where will that leave housing provision and homelessness? Many people understand that the Government does not want another overwhelming burden as a result of Covid-19, however, the Government have not factored into the equation the impact of these changes on landlords.
2. Impact on Landlords and Business
Landlord play an extremely crucial role in the provision of housing. As Local Authority housing stock is at an all-time low, private housing bolsters the demand. Not all landlords have the finances to cover the potential losses to their businesses created through rent arrears. What provisions will be put in place to safe-guard these businesses? How will the lenders assist landlords? Will a stay on lender repossessions?
One must also consider how the changes in notice periods will impact the sales market. Investor landlords may wish to buy an investment with a tenant in situe, however, for those that prefer a sale to complete with vacant possession, it will not be as straightforward. There will be a delay based on the fact that notice required will be 6 months for vacant possession until the 31st March 2021.
3. Keeping landlords informed and up to date on what can and cannot be done.
The notice periods for the Section 21 (Form 6A) are now in place - six months notice applies to fixed term and periodic tenancies, as well as break clauses. A six month tenancy created on or after the 29th August 2020 will no longer be a six month tenancy, unless, that is, the tenant serves notice on the landlord.
Tenant breaches of contract can, as they always have, be addressed by serving a Section 8 notice. Use of the section 8 requires one or a multitude of one of the 17 grounds (reasons) for the landlord to rely upon. From the point of lockdown, the Government changed the notice periods for section 8 to 3 months, regardless of the ground being used.
As from the 29th August, the notice periods have been amended depending depending on the grounds being used, with particular attention being paid to anti-social behaviour, rent arrears and domestic violence. It is crucial to seek the advice when deciding to go down the route of the Section 8 notice.
4. The business element.
The press relish the “doom and gloom” approach - no one wants to hear that not every tenant is in rent arrears, not every landlord is struggling, not everyone has lost their job. Landlords, often with the support of letting agents, run extensive portfolios of property and therefore, understand risk. Yes, understandably the pandemic is a risk never before experienced by landlords. However, landlords have been supportive of their tenants, ensuring that those who are facing genuine, significant financial challenges, are given breathing space to assist them with the change in personal and professional circumstances.
Landlords will also rethink their business strategies and perhaps put in place insurance policies that will support them if breaches of contract present themselves.
5. Documents and the Process.
The Government published guidance and new updated templates on Saturday 29th August 2020. The guidance clarifies the position relating to how the notices must be served, what is required in order for the landlord to comply with the changes and explains that the changes do not impact any notice served before the 29th August.
Some landlords may think that they should amend the AST and in particular the clauses relating to notice and break clauses. This is not necessary given that the new changes will take precedent over any mention of the original notice periods.
Landlords should also consider how they deal with renewals and whether they will include a break clause, where previously this may have been omitted. Periodic tenancies may also be a preference rather than a renewal on a fixed term.
Robert Jenrick’s announcement is a “temporary” measure. It is therefore important to consider whether serving notice in the spring would actually be beneficial if the Government reverts back to the notice periods as they were pre-lockdown.
The changes in notice periods are significant and they have created uncertainty within the housing sector, but only if there is a lack of understanding on how to navigate these changes and incorporate them into business strategies.
