“HA boards need to get to grips quickly with the proposals and make a decision which could greatly impact upon the relationship between the Government and the housing sector in the future.

The voluntary proposal

The starting position is that all social and affordable rent tenants would be entitled to the VRTB with a discount at the same rate as under the RTB (£103,900 in London and £77,900 elsewhere).

HAs would have discretion not to sell certain properties (e.g. rural areas, adapted properties – i.e. much wider exceptions than are currently the case) and offer an alternative; what the NHF is calling a ‘portable discount’.

A cost floor calculation would apply recognising that properties should not be sold for less than the costs of acquisition/outstanding debt associated with the property (akin to the net and peak debt exception in the right to acquire).

A strict timescale would be put in place which HAs must comply with. This would be enforced by the Regulator, which would have a key role in reviewing HA decision-making and considering tenant complaints. There is an indication in the guidelines that the Regulator could introduce a new Regulatory Standard to cover this, intended to measure the amount of home ownership facilitated by an HA and whether HAs are demonstrating a genuine presumption to sell in favour of tenants.

The proposal talks about introducing measures to tackle fraud and speculative tenant applications (including an up-front fee payable by the tenant and refundable on completion).

In return, the Government would guarantee full compensation for the discount provided that the HA replaces that property (70% payable on completion and 30% with a start on site). HAs would collectively need to ensure that at least one property is brought into HA ownership to replace each property sold under this voluntary scheme. HAs would have 3 years to replace each home. The mechanisms for replacement would be wide: development, open market purchase, revival of empty homes or working with other HAs.

Any grant associated with the property would be recycled through the Recycled Capital Grant Fund (or similar). For LSVT associations, the NHF envisage that local authorities will not have any clawback on receipts. Given that this could require a contract change to LSVTs’ transfer agreements, and that the Regulator and the Government has previously indicated it had no appetite to intrude into that contractual relationship, it is not surprising that the proposals at this stage give no detail on how this will be achieved.

Alongside the VRTB, HAs would be committing to extend home ownership opportunities for tenants and working with the Government to put other schemes in place to achieve this.

The proposal contains a statement to the effect that the Government would put in place arrangements to manage the financial costs of the VRTB policy.  The Government wishes to restrict that cost to the value of receipts received from the sale of high value council assets.  Ring-fencing of receipts from the sale of London council housing for reuse in London alone would create a very difficult issue and potentially this could involve an annual cap on the total discount amount. There is no detail on what this would be and how it would work.

Key questions

When deciding whether to accept the VRTB by the deadline of 5pm on Friday 2 October, HAs should be asking themselves some key questions:

• Would your organisation benefit from the flexibility of offering tenants a ‘portable discount’ in order for you to retain adapted/rural properties (an exemption which is not available with the current RTB)?
• Would open market receipts enable you to replace properties on a one-for-one basis?
• If the receipts are likely to be insufficient for replacement, do you have adequate “top up” funding?
• Is development of new homes an option for you and, if not, do you have good relationships with neighbouring developing associations? Would the alternative options of purchase/bringing empty homes back into use be viable?
• For LSVT organisations, will the voluntary scheme be caught by your clawback arrangements?  Check the wording of your transfer agreement, as it may not be sufficient to expect the Regulator or the Government to intervene, if you are caught.
• Are you prepared to support the Government’s wider proposal to develop other schemes to enable home ownership options for tenants?
• Do you have the resources in place to deal with an influx of applications within strict timescales?
• How does this option fit in with your organisational and tenant values?
• Will you have an asset cover issue?
• Given that the policy is voluntary and not statutory, if your organisation is charitable, how will you square the requirement to provide housing only to those unable to house themselves on the open market? Will those people exercising the VRTB fall into that category and, if not, what does this mean for your organisation’s charitable compliance?

What happens next?

HAs must respond in the form provided by the NHF by this Friday 2 October.

If the majority of HAs sign up then the NHF and the Government will set up a working group to work out the finer details: when it comes in, all HAs will be expected to participate (regardless of whether they have signed up).

If the proposal is not supported by the majority, the Government will set out a new statutory RTB in the Housing Bill although, to be clear, this would not be nationalisation by the back door. It does not mean that the Government (as opposed to your tenants) has any greater right to get its hands on your assets as it currently does. However, it is clear that the VRTB proposal that is on the table is potentially more flexible and accommodating than the corresponding statutory one is likely to be. The ultimate question is whether, if the sector rejected VRTB, the Government could implement its proposed statutory Right-to-Buy without significant dilution by the House of Lords?

So what will the future of the Right to Buy be? In the words of Greg Clark, “that is for you collectively to decide”.

What else? “Elephant in room” time

• VRTB and charitablity is very much a live issue to be resolved;
• Surely the Government will have to include provisions providing power to the HCA in the Housing Bill to compel HAs who might otherwise not wish to participate?
• Lenders would not be compelled to discharge properties subject to VRTB unlike the position with RTB and RTA so how would that work in practice;
• How will the Government prevent local authorities from enforcing s106 agreements (though rural schemes might be safe, the fact is that HAs would be unable to comply with typical existing s106 agreements)?

For more information

If you would like to talk to one of our experts about the implications of VRTB v statutory Right-to-Buy to your organisation, please contactJonathan Cox or  Emma Holmes.”

UPDATE: the s21 Regulations have, as of today, been amended as there was a serious error in the prescribed section 21 notice form.  This has now been rectified and the correct section 21 notice can be accessed using the link at the bottom of the page.  This note has also been updated to clarify some important points from our earlier briefing.

New Rules and Form for section 21

There is a new prescribed form for s.21 which must be used for new ASTs which started on or after 1 October 2015. It may also be used for existing tenancies.  It does not have to be used for periodic tenancies created after 1 October on the expiry/rolling over of a fixed term which began before 1 October 2015.

Do note that the original new section 21 prescribed form notice contained an error at part 3, which said that the notice is only valid for four months from the date of issue for periodic tenancies. This is incorrect.  The notice is valid for four months from the date after which possession could be required. 

There are also further regulations as follows (hardly “deregulation”!):

• Gone are the days of serving a s.21 notice at the start of a tenancy.  No s.21 notice can be served within the first 4 months of an AST;
• Proceedings for possession can no longer be started within the first 6 months of the tenancy;
• As now clarified – Landlords essentially have 6 months from the date of issue of the s21 notice to start proceedings under fixed term ASTs.  For properties under rolling/periodic tenancies the notice is valid for 4 months from the date after which possession could be required, (which is in effect 6 months) otherwise the notice expires;
• The requirement that the s.21 notice must expire on the last day of a period of a tenancy is gone! From 1st October, 2 months’ notice is all that is required for all ASTs now, which could therefore end in the middle of a ‘period of the tenancy’.  As a result the tenant is given a right to claim back pro-rata rent if already paid in advance (s40 contains a simple repayment formula);
• For the few periodic ASTs granted with a quarterly or 6 monthly period of the tenancy (rare, save in the private rented sector) then the notice period cannot be shorter than a period of the tenancy.  So, if there is a quarterly periodic tenancy, the s21 notice must give 3 months’ notice from date of service;
• For ASTs that begin after 1 October 2015 a section 21 notice can no longer be served/valid unless the tenant has already been provided with:
  • An Energy Performance Certificate (EPC) for the property – which Landlords are (in most circumstances) already under an obligation to provide before the commencement of the tenancy; and
  • A current gas safety certificate – which again, landlords are already under an obligation to supply to the tenant before they occupy the premises and after every annual check.

If the tenant has not had these 2 documents before (despite the fact that would be a breach of the other regulations which require landlords to provide them at the start of the tenancy), serve them before or with the s21 notice.  They do not need to be served again with the s21 notice if they were issued at the tenancy start date.  

Failure to comply with the above mean ‘no fault’ possession (accelerated possession proceedings) cannot be used until they are complied with.

Registered providers of social housing, unlike private sector landlords,escape a further requirement, to supply tenants on service of a s21 notice with an up to date version of the DCLG booklet “How to rent: the checklist for renting in England”.

The new rules initially apply only to ASTs in England granted on or after 1st October 2015. After 3 years (i.e. after 1 October 2018), they will apply to all AST tenancies whenever they began.

Preventing retaliatory eviction

This has been a hot topic in the media (landlords evicting tenants for complaining about disrepair).  The Government has responded by introducing a somewhat convoluted procedure to regulate the issue, throwing in further amendments to the s.21 procedure for private landlords.  Private registered providers of social housing are, however, specifically exempted from these requirements. (Section 31).

These steps are however likely to increase the number of requests for local authorities to serve Improvement notices.

Tenancy deposits

These new provisions under the Act have been in force from 26 March 2015 and introduce rules about the provision of information to tenants and sanctions for non-compliance.  There is a ban on section 21 notices being served at a time when the deposit is not being held in accordance with an authorised scheme (s.31).

Action Required

The Act and new Regulations mean you need to:

• Review policies and procedures for ASTs;
• Change the s.21 notice form being used;
• Make sure EPCs and gas safety certificates are served at the start of tenancies failing which serve before/with section 21 notices;
• Double check compliance re tenancy deposits e.g. for any market rent or keyworker ASTs.

How can we help?

• We are offering updating s21 notice training to avoid being inadvertently tripped up by the new rules.
• We will cover these changes in outline at our Housing Management Law Update on 11 November 2015 10am-12.30pm at our offices.  Click here to book.
• The new and updated section 21 notice form is available here.
• Clients can request a Word version of the new section 21 notice by emailing Katey.Slaughter@anthonycollins.com.
• If you own or manage private sector housing in a non registered body, then see our private sector focused briefing.

For more information

Contact Helen Tucker.”

Clearly this is also relevant to local authorities monitoring the private rented sector.  We also cover other changes that apply from 1 October 2015.

Do note that the Regulations have, as of today, been amended as there was a serious error in the prescribed section 21 notice.  This has now been rectified and the correct section 21 notice can be accessed using the link at the bottom of the page (see section on ‘Other important changes, below, for further details).

S21 notices

For assured shorthold tenancies (ASTs) that begin after 1 October 2015 a section 21 notice can no longer be served/is valid unless the tenant has already been provided with:

• An Energy Performance Certificate (EPC) for the property – which Landlords are (in most circumstances) already under an obligation to provide before the commencement of the tenancy;
• A current gas safety certificate – which again, landlords are already under an obligation to supply to the tenant before they occupy the premises and after every annual check; and
• For private landlords only, a copy of the CLG booklet “How to rent: the checklist for renting in England”.  This can be found by clicking here.
• If the booklet is provided at the tenancy start date or at any time later, a further copy does not need to be provided to a tenant with the s21 notice. However if a new version of the booklet has been published before the start of a replacement tenancy (e.g. second fixed term tenancy granted immediately on expiry of previous fixed term) the updated booklet does need to be served before or with the s21 notice.

If the tenant has not had these 3 documents before (despite the fact that would be a breach of the other regulations which require landlords to provide them at the start of the tenancy!), serve them before or with the s21 notice.

We also suggest that landlords obtain permission from the tenant at the tenancy sign up to accept service of the DCLG booklet by email to a specific email address so as to avoid having to serve a hard copy.

Retaliatory Eviction

New provisions for private landlords also come into effect for all new ASTs granted on or after 1 October 2015 aimed at preventing retaliatory eviction for reporting disrepair.  However, the regulations set out an elaborate procedure which must be followed before a section 21 is invalid.

Essentially, the rules provide that a section 21 notice cannot be given within 6 months of a landlord receiving an Improvement Notice from the local authority in respect of a property.  However to get to this point:

• The tenant must first make a written complaint to their landlord;
• The landlord has 14 days to provide an ‘adequate’ response;
• If not, the tenant must complain to the local housing authority;
• The local authority should then inspect the property and serve the improvement notice; and
• Any section 21 notice issued after the tenant’s written complaint is invalid, and any ongoing possession proceedings will be struck out.  However, if an order for possession has already been granted, the Council’s notice has no effect.

Registered providers of social housing are exempt from this requirement.  The legislation also does not apply retrospectively to existing tenancies, and thus only provides protection for tenants on ASTs granted after the 1 October 2015.

Other important changes

The irony of the ‘Deregulation’ Act is that it introduces a whole new scheme of regulation for section 21 notices which apply across the board to all landlords!  The important changes are listed below:

• There is a new prescribed form for section 21 notices which must be used for all ASTs which started on or after 1 October 2015; this can also be used for tenancies that began earlier if you choose to.  Do note that the original new section 21 notice first published 7 September 2015 contained an error at part 3, which said that the notice is only valid for four months from the date of issue for periodic tenancies – this is wrong!  The notice is valid for four months from the date after which possession could be required (which is in effect 6 months);
• A section 21 notice cannot be served within the first 4 months of an AST;
• As now clarified – Landlords essentially have 6 months from the date of issue of the s21 notice to start proceedings under fixed term ASTs.  For properties under rolling/periodic tenancies the form is valid for 4 months from the date after which possession could be required, otherwise the notice expires;
• The requirement that the section 21 notices must expire on the last day of a period of a tenancy is no more – 2 months notice is all that is required.  But for ASTs granted with a quarterly or 6 monthly period of tenancy (less common), the notice period cannot be shorter than that period of the tenancy;
• There is a ban on section 21 notices being served at a time when the tenancy deposit is not held in accordance with an authorised scheme, so make sure you are complying with the rules on tenancy deposits.

The new rules initially apply only to ASTs in England granted on or after 1 October 2015.  After 3 years (i.e. after 1 October 2018), they will apply to all ASTs whenever they began.

Action required

The Act and new Regulations mean you need to:

• Make sure EPCs and gas safety certificates are served at the start of tenancies failing which serve before/with section 21 notices;
• Ensure that the DCLG booklet is issued to tenants at the outset of their tenancies and serve and updated version where a ‘new’ replacement tenancy is granted (where relevant);
• Use the new section 21 notice prescribed form  for ASTs beginning after 1 October 2015;
• Double check your compliance with tenancy deposit regulations;
• Obtain a tenant’s email address at sign up and ask them to agree it can be used for service of notices and other documents in connection with the tenancy.

How can we help?

• The new and updated section 21 notice form is available here.
• Clients can request a Word version of the section 21 notice by emailing Katey.Slaughter@anthonycollins.com.

For more information

Contact Helen Tucker.”