In April 2012 the Localism Act 2011 brought in various changes which introduced strict requirements for landlords wishing to seek possession of residential property at the end of the term let under an Assured Shorthold Tenancy (AST).  In addition, further changes will come into force on 1 October 2015 which provide further hurdles for landlords in securing possession of property at the end of the term.

Deposits – an introduction

Since April 2007:

  • Any landlord renting out residential property under an AST who takes a security deposit has been obliged to place that deposit in an authorised tenancy deposit protection scheme (TDPS) which governs how the deposit is dealt with at the end of the term.
  • A landlord in default of the obligation to put the deposit in a TDPS and provide the tenant with details of the scheme could be forced to pay to the tenant a penalty of three times the amount of the deposit.
  • In addition, a landlord could not serve a notice seeking possession at the end of the term (a section 21 notice) while the deposit was not protected.

Deposits – the first set of changes

The changes brought in have meant that since April 2012:

  • A deposit must be protected within 30 days of receipt.
  • If a deposit is not protected within 30 days of receipt then a landlord may not serve a section 21 notice seeking possession at all until the deposit is returned.
  • Details about the scheme must be provided to the tenant within 30 days of receipt of the deposit.
  • A section 21 notice cannot be served until the prescribed information is provided.  Note that failure to provide the information in time can be remedied, unlike protection of the deposit which cannot be.

It is crucial for landlords who manage buy to let portfolios or developers investing in residential property let on ASTs that they ensure deposits are or have been protected within the correct time frame.  If they have not been, the deposit will have to be returned to the tenant in full before a section 21 notice can be served.

Further changes

Changes will also come into force on 1 October 2015 which mean further restrictions for landlords as to when they can serve section 21 notices:

  • Restriction on retaliatory evictions, which means a landlord cannot serve a section 21 notice where a tenant has made a written complaint to his landlord about the condition of the premises or common parts and either the landlord has not responded or the response is inadequate.
  • A landlord cannot serve a section 21 notice within the first four months of the term.
  • A landlord cannot serve a section 21 notice unless he has provided the tenant with an Energy Performance Certificate or a gas safety certificate.
  • A landlord cannot serve a section 21 notice unless he has provided information about the respective rights and responsibilities of both the landlord and the tenant under an AST.

These changes will only apply to tenancies granted after 1 October 2015 and they will not apply to tenants who “hold over” after 1 October 2015.

These changes will potentially have a huge impact on landlords and could cause real difficulties for landlords who want possession of residential property subject to ASTs.  It is not clear, for example, what steps a landlord needs to take to address a tenant’s complaint about the condition of the premises adequately.  In addition, the common practice of many landlord’s agents of serving a section 21 notice as soon as the AST is granted and the deposit protected will now be unlawful.

In addition to these changes, a new prescribed form of section 21 notice will be introduced on 1 October 2015.  As with the other changes, this does not have to be used in relation to pre-existing tenancies but it can be used immediately, if a landlord so chooses.

Landlords who own portfolios which include residential property let on ASTs would be well advised to start implementing these reforms now so they become part of their standard practice by the time the new statutory provisions are in force.  Developers need to make detailed enquiries when purchasing residential property to ensure there are no statutory bars to their obtaining possession of any parts of their development let on an AST.