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The Deregulation Act 2015 (“the Act”) introduced important changes to when landlords of property let on Assured Shorthold Tenancies (ASTs) can serve a valid Section 21 notice in order to gain possession of property. With Buy to Let properties continuing to be a popular investment choice, deals involving properties subject to AST’s are becoming increasingly common.
A Section 21 notice is an invaluable tool as it enables a lender to serve the occupying tenant with two months’ notice to vacate the property without having to specify a reason for doing so. Moreover, provided the necessary requirements of the Act have been met, possession proceedings can be fast tracked using the ‘accelerated procedure’ meaning there is usually no requirement for a hearing and the Court will consider the application on the papers alone.
It is important therefore that lenders are fully aware of the requirements of the Act from the outset so that in the event of default, vacant possession of the property can be obtained without delay which in turn increases the prospect of realising the asset at the best price achievable.
Validity of a Section 21 notice
The Act requires a landlord to comply with the following requirements before a valid Section 21 notice can be served on a tenant occupying pursuant to an AST:
• Where the tenant has raised a legitimate complaint about the condition of the property with the borrower, prior to being served with a Section 21 notice, they will be protected from retaliatory eviction (i.e. being served with a section 21 notice in response to the complaint). It is therefore important that lenders investigate whether any complaints of disrepair are outstanding pre lend and before serving a Section 21 notice.
• The borrower must comply with certain legal obligations, including providing their tenants with a gas safety and energy performance certificates prior to commencement of the AST. The borrower must also provide tenants with certain prescribed information relating to the borrower’s rights and responsibilities as well as the tenant’s rights and responsibilities under an AST, as set out in the DCLG: How to rent Checklist for renting in England.
• Finally, where the borrower has failed to protect a tenant’s deposit under one of the government recognised schemes and provide the tenant with the prescribed information, within 30 days of receiving it, a valid Section 21 notice cannot be served on the tenant until the prescribed information has been provided and the deposit returned to the tenant. In addition, if the borrower failed to protect the tenant’s deposit within 30 days, then the tenant may have a claim against the borrower, or any other relevant person, for a claim of up to three times the amount of the original deposit.
Key points for lenders
It is essential therefore that when dealing with a Buy to Let property lenders ensure that the above requirements have been complied with by the borrower.
Lenders should ensure that any deposit received by the borrower from the tenant has been properly registered under one of the government recognised schemes. There can be cases where this is not checked by the lender at the outset which results in difficulties post default. Tenants are often very well aware of their rights and of the fact that if they avoid receipt of the deposit then a section 21 notice cannot be served. In the event that a borrower has not registered the deposit lenders should consider insisting that the borrower formally returns the deposit to the tenant with evidence confirming the same prior to completion.
The other significant point to consider is the gas safety certificate. The law is strict on how and when a gas safety certificate should be provided to a tenant. If a gas safety certificate was not provided to the tenant prior to commencement of the AST then as long as a copy is provided to the tenant prior to service of the section 21, any possession claim issued will be valid. However, it is not good enough to provide the tenant with a gas safety certificate which predates the AST. The tenant must be provided with the gas safety certificate which covered the period of commencement of the AST. There can be cases where the gas safety certificate was not obtained from the borrower pre lend and lenders have been unable to track down a copy of the necessary certificate post default. Lenders are therefore advised to request a copy of the gas safety certificate covering the period of any AST from the borrower prior to completion.
It is extremely important that lenders familiarise themselves with the requirements of the Act so that, should the need arise to terminate a tenancy by way of a Section 21 Notice, they are not precluded from doing so.
If you are a lender seeking advice on evicting a tenant, you can contact Jonathan Newman or the team for assistance on 020 8731 3080 or email [email protected]