With the pandemic sweeping the country, the Community Secretary Robert Jenrick announced on 18 March 2020 the introduction of emergency legislation that would assist both landlords and tenants. "The Government is clear – no renter who has lost income due to coronavirus will be forced out of their home, nor will any landlord face unmanageable debts," he said.

The Government has now brought the Coronavirus Act 2020 into force. The Act implements a number of temporary changes to the rented sector. In this article, we examine the far-reaching implications for both residential landlords and tenants in England.

What are the packages of reforms that have been introduced?

The following reforms have been introduced:

  • extending the notice period landlords need to give their tenants when seeking possession of property to three months with scope for this to be extended
  • possession hearings suspended for 90 days from 27 March 2020
  • widening the applicability of the pre-action protocol, previously only applicable to social landlords, to include the private rented sector. This has not yet come into force
  • obligating buy-to-let lenders to offer a mortgage holiday of up to three months for private landlords who have been impacted by the coronavirus. This is on the understanding that landlords will be expected to offer an equivalent "holiday" to their tenants in respect of paying rent

Extending the notice tenants are entitled to receive for the duration of the emergency

For an assured shorthold tenancy, which is the main type of tenancy in the private rented sector, a landlord normally needs to serve a notice pursuant to Section 21 of the Housing Act 1988. If valid, such notices give the tenant not less than two months' notice that the landlord requires possession of the property. If the tenant fails to leave, then the landlord can apply to the county court for a possession order.

The Coronavirus Act 2020 has temporarily extended the notice period required so that not less than three months' notice must be given before the landlord can apply to the court for a possession order. This new requirement will last at least until 30 September 2020. Whilst the original announcement suggested a complete ban on a landlord serving a notice, in fact landlords can serve a Section 21 notice but any notice now served must abide by the new notice period.

It should be noted that the new legislation makes clear that it only applies to new notices served after the legislation came into force and therefore a valid Section 21 notice already served by a landlord means that they can issue proceedings at the expiry of the two months but progress of such a claim will be hampered as a result of the steps that have been taken by the Government as detailed above.

What about other notices?

The same principle applies to both notices served under the Rent Act 1977 and Section 8 notices in that the landlord must give at least three months' notice before they can apply to the court for possession. A Section 8 notice is used by a landlord of an assured or assured shorthold tenant when they rely on one of the specific grounds for possession, as set out in the Housing Act 1988, such as rent arrears or anti-social behaviour by the tenant. The three month notice period will apply whatever ground is being relied on in the Section 8 notice.

Whilst these temporary measures are an important safeguard for tenants in these uncertain times, they could have unwanted consequences for landlords and other occupiers, especially in more densely populated neighbourhoods. During the public health emergency, landlords of tenants who are causing the most serious anti-social behaviour will have more limited legal options than they would ordinarily have.

The extended notice period will not apply to lodgers' agreements and other license agreements. Nor will it apply for non-assured tenancies, such as company lets, live/work tenancies and those often used for homeless applicants in temporary accommodation.

Landlords must use new prescribed forms which are an updated Form 6A for Section 21 notices and a Form 3 for Section 8 notices.

Suspending all ongoing possession cases for 90 days from 27 March 2020

All current possession proceedings will be suspended for a period of 90 days from 27 March 2020. This means that it will not be possible for a landlord to obtain a possession order until the end of June 2020 at the earliest, and this could be extended further. We anticipate that these steps will create a surge of cases later in the year and result in the court system (where there are often already significant delays) being inundated so that the ramification of these changes will be felt well into 2021.

It is crucial that these measures were taken by the Government for very practical reasons to avoid large numbers of people being made homeless during a pandemic. Without these measures, the need to secure a roof over their heads for themself and their family would force people into a situation where they would be at far greater risk of being infected and could not self-isolate and stay safely at home.

However although undoubtedly necessary for the safeguarding of tenants, the suspension of all cases could be particularly harsh news for some landlords. This is because many of the cases that were already in the court system as at 27 March 2020 relate to matters that pre-date the pandemic by many months. For example, some landlords that were seeking possession from tenants who have failed to pay rent in November and December last year, will now be faced with a further wait of at least three months before any progress can be made in the case. Landlords who rely upon rental income to live on may find themselves under very serious financial pressure.

Landlords will be expected to abide by the pre-action protocol for social landlords in the future

This change has yet to come into force but means that for any future possession proceedings issued by a private landlord on grounds of rent arrears or another mandatory ground, they must abide by the pre-action protocol. The protocol sets out a series of steps which a social landlord (such as a housing association) must take before issuing possession proceedings against a tenant.

The general requirements of the pre-action protocol are that landlords are expected to pro-actively take steps to communicate with their tenant, exchange information and avoid litigation whenever possible. Landlords also need to ensure they can document that they have taken steps to communicate with the tenant if the matter does proceed to court.

Typical steps which a landlord will be expected to take under the protocol before serving a notice, for example on grounds of rent arrears, would include contacting the tenant to discuss their financial circumstances and the reason for the arrears, what benefits the tenant is receiving and reach an agreement with the tenant of an affordable arrangement for paying the arrears.

A landlord should also not start possession proceedings if a tenant has provided all the necessary evidence to support a benefit claim and there is a reasonable expectation that they will be entitled to some benefits. Courts can take into account any unreasonable failure to comply when considering who should bear the cost of the claim or can also adjourn the claim. A court can also strike out a claim when possession is not sought on a mandatory ground.

Mortgage holiday for private landlords

The Government foresees that tenants are likely to be disproportionately hit by job losses and reductions in their working hours, or contracts if freelance, which will result in financial hardship for many. They may also experience financial hardship if hit by illness themselves or through having to care for someone else in their household who becomes sick.

If tenants in either social housing or privately rented accommodation are struggling to pay their rent due to coronavirus, they can speak to their landlord about a payment holiday for up to three months. However landlords are not obliged to agree to such a suggestion and there is nothing in the legislation that says that tenants can stop paying the rent and so interest may accrue, depending on the terms of the tenancy agreement, if they fail to pay the rent.

The new legislation means that landlords who do not have mortgage arrears can immediately apply for a payment holiday. Landlords will be able to apply even if their tenants are able to pay the rent if they are themselves facing financial hardship. However it will be for the lender to decide on a case by case basis whether to grant a mortgage holiday or not to the landlord.

At the end of the payment holiday, landlords and tenants will be expected to work together to establish an affordable repayment plan, taking into account the tenant's individual circumstances.

Conclusion

The measures introduced by the Government are an unprecedented intervention in the relationship between landlords and tenants and the swift administration of justice. Taken together, they will hopefully provide tenants with the reassurance that they will not be evicted during the pandemic and give landlords the confidence that they will not face losing their investment if they are unable to pay their mortgage.

It will be interesting to see how the legislation works in practice in the weeks and months to come and how it impacts on both landlords and tenants.