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ARLA Propertymark Q&A: Managing Covid-19's continued impact on the possession process
19 October 2020
A legal expert for ARLA Propertymark answers letting agents' questions on kickstarting the possession process for stayed cases, how long it could take for cases to be heard, accelerated procedures, notice periods for arrears, and more.
Robert Bolwell, Senior Partner at Dutton Gregory, which manages the ARLA Propertymark Legal Helpline, answered letting agents questions on Covid-19's impact on the possession process in a Goodlord webinar. Click on a question to jump to the answer or watch the webinar on-demand now.
How would you summarise the key changes for people who haven't yet had to use the courts since they reopened?
Number one, we're going to have social distancing in courts. There will be fewer cases per hour as I indicated earlier. Things are going to take longer. The other thing you got to bear in mind is that whilst we've all these new edicts through from the Ministry of Justice, various courts seem to be doing things in a different way. But the process is going to take longer, because they have to have this review where a judge is going to look at the paperwork and see whether landlords and tenants have tried to agree on a repayment plan if we're talking about rent arrears, it's going to take longer. Hearings are probably going to be just the same length, so two and a half minutes per case, but we'll be waiting much, much longer.
What I don't know is how this is going to impact on the landlords generally, because if you think about the last five years or so, landlords have been hit with a reduction in the interest they can claim on their mortgages. We can't claim a writing down on wear and tear on the contents and fittings, capital gains tax is going in one direction only, if you want to add your portfolio, we've got stamp duty surcharge and who knows what's going to happen to that in the next year. We've now got problems with the courts.
If a tenant who was given notice in February is refusing to move out due to Covid-19, what can the landlord do if they need to get the property back? The bad news is that you've got to serve a new notice. Once you serve that notice, once it expires in six months time, issue proceedings. Back in February in 2020 when the notice was served, your section 21 notice had to be of two months’ duration, so it would have run out we assume sometime in April, and once you serve that notice, you've only got six months to actually issue proceedings.
If you had served notice on the 14th of February, you could have issued proceedings, I assume, sometime in April or going forward, but, and here is the thing, if you haven't issued proceedings within six months of that notice going out, by mid-August, that notice becomes time barred. The bad news I'm afraid is if you haven't issued proceedings, you've now got to serve a new section 21 notice, and of course, because the rules changed over the August bank holiday, it's not a two month notice, it's now a six-month notice.
Before somebody says, "Well, hang on a moment, we were in the lockdown in April, how could we possibly serve our notice before now?" Well, the answer is quite simple, while the courts weren't actually processing moving forward any possession cases, they were still accepting new cases in the office. You could send off your court papers, the court would rubber stamp them and say, "Yes, it's been issued on this particular day," but then the case would just be stayed or adjourned until the lockdown came to an end.
If you have a case that's been stayed, how do you kick start that process again?
You must file a reactivation notice, you must. You have got basically until sometimes towards the end of January to do that, if you don't do it by that date, your case is dead, it will never go anywhere. You need that reactivation notice. Now, it's not a prescribed form, but the government has produced a form which they recommend you use. Of course, with your reactivation notice, you've got your rent statement, which might be going back for two years, depending how long the tenant's been in the property and you've got to put in your Covid-19 statement and what effect Covid-19 has had on your tenants.
You need to file it with the court, you also need to send a copy of that to the tenant so the tenant knows what you've done. Then, in theory, you then get this review meeting when the judge will go through all the paperwork and he'll decide whether you should go forward with the final hearing or make a ruling there and then. Now, you'll get that review hearing through fairly quickly I would hope, but the problem is you are still going to have to wait then if necessary for a final hearing, which could be another four weeks after the review date. But nothing's going to happen until you file that reactivation notice, so get that done.
How long will it take for cases to be looked at if there aren’t significant arrears?
The best estimate at the moment is the backlog is probably about 65,000 cases across the country. With this question, we’re talking about accelerated proceedings. Now most people would be aware that if you have a claim for rent arrears and you want an order for those rent arrears, there's got to be a hearing at some stage in front of a judge, and that I think is where the big delays going to be is getting court time. If you've got an expired section 21 and all you want is the possession order, you can issue proceedings under the so-called accelerated procedure.
In theory, with accelerated procedure, you're filing all the documentation a judge could possibly want, copies are sent out to the tenant, and it says no response after a 14 day period, you write to the court and say, "Give us an order." If the judge is happy with the paperwork, you get an order without any hearing at all. That's why it's called accelerate. You're not waiting for court time, it's a quicker process. Now that was the situation pre-Covid-19.
What's happening now is slightly different. With all cases, a judge requires what we call a COVID statement. He needs a statement to indicate what effect the pandemic has had on the tenant and on the tenet's dependents. That doesn't mean we're going to go digging for information, but if you know if for example your tenant’s been furloughed, if you know your tenant's been sick, you have to provide that information to the court. Once the judge has got that information, he will review it. It's a new step in the process where he will review everything including the COVID information and then he will decide what to do. He'll decide if we go to a hearing or if he has decided no hearing is necessary, then we might get an order under the accelerated process without that hearing.
But because you've got that formal review process now which is an extra step in the process, things are going to take time. It's going to take longer than usual, but all I can say at the moment, the indicators are that you will save time if you can go down the accelerated route. If you go down the normal route, combine your claim for possession with a claim for rent arrears and you're waiting for judicial time.
Now, apart from the courts being clogged up with 65,000 cases, anybody who's been to court on a possession case would know that a judge would normally rattle through these at perhaps 10 an hour. The latest indications from the Ministry of Justice is that it is now two or three cases an hour. Not because the courts can't cope with the process, but because of social distancing.
When it does mean you're going to be physically in front of a judge if you are pursuing a possession claim together with a claim for rent arrears?
If you can do an accelerated application you'll be saving time, weeks, maybe even months. We just don't know at the moment, but of course what some landlords were already doing was bringing an accelerated claim to get a possession order and then going through the small claims procedure in a separate court case to get a judgment for the rent arrears. Now that is one way of hopefully getting your property back much quicker, but if you want to pursue that second court case through the small claims procedure, yes, there's going to be another court fee to pay, more legal costs, et cetera. It's time versus money. It's the old horn and chestnut. What's more important for a landlord, time or money?
You can still go down the accelerated route. I will just say on this particular topic, the government did change the actual court forms due to the lockdown. The form you fill in now for an accelerated application is more like a booklet rather than a form. Yes, you can do it, and it will be quicker. How much quicker? I don't know. Put your finger in the wind, we just don't know, but it will definitely be quicker.
If there aren’t any arrears, do you need to provide a Covid-19 statement with the paperwork or only when requested?
The key date here is 3 August 2020. That's when the new rules about these Covid-19 statements came into play. If you filed your court papers on or after the 3rd of August, you would have had to file a statement with the original court papers. If you didn't, in theory, the court would have simply sent all those court papers back to you or back to your lawyers.
If you filed your claim after 3 August, then, yes, you've got to file that statement now. Now technically it's called a reactivation notice, and apart from a Covid-19 statement, your reactivation notice will also include, believe it or not, a two-year rent arrears statement, because the court wants to know what the payment history of these tenants has been over the previous two years. Even if it's an accelerated claim and theoretically you're not claiming rent arrears, you still should be filing that statement showing rent arrears for the last two years. Now obviously if your tenants, who had been in the property for 12 months, you file a 12 month statement. If they've been in for longer, it's up to a two-year statement.
How much notice does the tenant have to give to the landlord's agents?
That hasn't actually changed. All this legislation is aimed at landlords I'm afraid. I mean if you think about the logic here, the logic is we don't want to force people to leave their homes. That's the logic. It's on public health grounds. Yes, it's six months if we're serving a notice, but if you're a tenant and you want to get out, the normal pre-Covid-19 rules apply. The rules for tenants haven't changed. It's only against the landlords who've got to cope with all this new legislation.
If your fixed term is coming to end, and you're paying your monthly rent, well, unless there's anything special in your tenancy agreement, you as the tenant, you give one month's notice. If you're in the middle of the fixed term, and you want to leave, you're the tenant, question number one is there a break clause? Can you legitimately activate that break clause and give whatever notice that break clause determines? If there's no break clause, and you leave in the fixed term, normal rules apply, if you go, you the tenant are in breach of contract, and despite all the legislation stuff, the landlord can seek compensation for the losses he's going to suffer if you the tenant decide to go halfway your fixed term.
Do we have to change the wording on section eight notices around the grounds for rent arrears?
A section 8 notice, like a section 21 notice, is what we call prescribed. In other words, it's set down in a statue that's written by Parliament, and if you don't use that form, that up to date form, your notice is invalid. when they made these changes to the serving rules, the government also changed the form of a section 21 and a section 8 notice. If you want to go to the government website, I usually search for a section eight, I do a form three which is what the government will call it, 'form three section eight government', and that will take you through to the government website where you can download a section eight notice. That downloaded version is the most up to date version you'll see. It looks very similar to the ones we used pre-COVID, except now that we have different expiry periods for different grounds, all those expiry periods are set out in the notice.
You must use the correct form, but subject to that, there's no special wording as long as you fill in every section of the form. Fill in every section, landlord's name, landlord's address, all the rest of it, you're okay, but bear in mind that if you have more than two months’ arrears, you can serve a section eight notice on ground eight, but if it's only say three months arrears the notice period is going to be six months, because that's the norm for most notices these days.
What do I do if I've got rent arrears now of five months? Do I serve a notice now for six months’ expiration date or do I wait till they go over the six month mark?
We are looking at situations now where clients, landlords, agents, have served a six-month notice, because the rent arrears are quite small initially, but when we get to that six-month mark, we might be serving another notice, because we can take advantage of the shorter period, the four weeks.
The general rule is it's never wrong to serve two notices. If you've got rent arrears that are three or four months at the moment, it would be ground eights, but also grounds 10 and 11 thrown with your rent arrears and late payment, but if things start getting worse and you hit that six-month mark, don't hold back, serve another notice for four weeks, because that might mean you start proceedings that much quicker than waiting for your first notice to expire.
Can you get ahead of the game by submitting a claim to the courts before the notice is expired?
No, you can't. If you think about it, a notice would give you what lawyers call a cause of action, a reason to start the court proceedings. Now if you are relying on section 21 of the Housing Act, yes, it's got to be preceded by a section 21 notice which must have expired before you issue proceedings. If you're relying on grounds eight, yes, you've got to make sure it's been served and it's expired.
There are other grounds where, in theory, you could try it, because there is in the legislation something called section eight subsection 1-B of the Housing Act 1988 which basically says a court can dispense with the requirement to serve any default notice if the court thinks it's just and equitable. Now if you want to go in front of a judge with perhaps Shelter acting for your tenant and argue that it was just and equitable not to serve any notice when we've had all this legislation for over the last six months, you're going to have a braver lawyer than I am. The rule is if you want to go to court, there's got to be a notice. It's got to be an exceptional circumstance to justify no notice at all.
In fact, even if you think of a case of nuisance, which technically would be ground 14, you can serve a notice for nuisance today and start proceedings tomorrow. Again, if it's a really, really serious case, but even the legislation presupposes you'll give them at least 24 hours’ notice. Trying to say not serving notice is just and equitable is going to be a bit of a tall order to be honest.
If a section 21 notice has been issued and the tenant has now fallen into a periodic tenancy, and there has been since then a revised TDS certificate. Does that revised certificate somehow revoke the section 21 that happened beforehand?
As long as there was a valid certificate at the time you served the section 21, you’ve got no problems. Now, I can only assume the revised certificate is because perhaps you have refunded part of the deposit, but as long as the paperwork they had at the time you served the section 21 was up to date and it was okay, no problems at all.
Under the tenant fee ban legislation, one of the things it says there is if you are holding an authorized payment from your tenant, you can't serve a section 21. If for example, you refunded part of the deposit, say I don't know on the 1st of May, you served the section 21 on the 2nd of May, but you only the made the refund on the 3rd of May, there might be an argument there that your section 21 is invalid, because you should have refunded the money before you served the section 21. But as long as you served the right documentation prior to your section 21, you're okay. What happens afterwards is irrelevant.
How could the Tenant Fees Act impact payment plans?
One of the things the courts really want us to do is sit down with tenants and try to agree to a payment plan. Now the problem you've got with the tenant fee ban legislation of course is that your deposit is tied to the rent. Depending on how much rent you're taking from a particular tenant, it could well be that you are limited to five weeks rent as a deposit.
Now if you're not permanently reducing the rent, you're going to have to adjust your deposit. What we're saying to everybody is to make it absolutely clear that when you are giving people a rent holiday or a discount or whatever, it's temporary. It will be reviewed in, say, three months’ time, and it does not change their contractual obligations under the tenancy agreement, otherwise you're creating problems down the road trying to adjust deposits. Be very careful.
What do you do if you haven't heard a peep out of your tenant? Any traps for the unwary there?
If they’ve gone incommunicado, the first thing you really want to do is send someone around to make sure the tenant is still there. An awful lot of properties over the last seven months have just been abandoned and the tenants have gone and not said anything at all.
Now, if you're in Scotland, you do have a proper abandonment notice or giving notice on the door, time limits and all the rest of it, and at the end of that period you can change the locks with immunity. We don't have that in England, we don't have an abandonment process, because if you're in a rollover type situation and there are perhaps significant arrears or other complaints against the tenant, you could put an abandonment notice on the front door, give the tenant due to notice in seven days time or whatever you're going to change the locks. Send a copy of that notice to every possible address you've got for the landlord, social media, Instagram, whatever it may be, send it out so the tenant knows what's going on, and then you have to decide whether you want to take the risk. Clearly you've got substantial rent arrears, the risk of a tenant coming back in six months saying I want my property back when he knows there's a massive bill is just a minute.
More landlords are doing this now, because the alternative, six-month notice maybe and court in April of next year, is just unthinkable. Think about abandonment notices. Think about explaining to your landlords the risk of things that could possibly go wrong, or give us a call here at Dutton Gregory on the helpline and we'll talk you through it.
If your tenant’s gone AWOL, try and establish contact as best you can. Obviously, if they're still paying the rent and they're still living in the property, well, there's not a great deal you can do unless you're in a situation where you can serve a section 21. If the tenants are paying the rent, as a landlord personally, I'll just be happy and let them carry on paying.
What impact do you think Covid-19 might have on the courts if a tenant starts to argue that actually that process has been affecting the tenant?
Well, the obvious question to ask is what happens if you have an eviction, the bailiff turns up at nine o'clock in the morning, the tenant opens the door in the mask and says, "I'm sorry, I'm self isolating." Now, we haven't had any of those yet but I can see a situation in which bailiffs are going to say, "Well, I'm sorry, we can't do it." The truth of the moment we're in is we don't really know. The courts only reopened on the 21st of September.
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