All change in housing law

Scott Greenwood examines some of the greatest changes to housing management law for many years.

I have been a specialist social housing lawyer now for around 20 years and I cannot remember a time when there has been such rapid legislative change within this field of law and practice. It has been a very busy 12-18 months and there has been a great deal of legislative change introduced by the current Government. Some of these changes are built on top of existing Government policy, but some of the changes are very new and some have come in very suddenly and have caught the sector by surprise, in particular, the introduction of the -1% rent reductions under the Welfare Reform & Work Act 2016. There is no time to catch up in this climate, as there is more change on the horizon and I suspect quite rapid change which will be introduced under the Housing & Planning Act 2016. So if you specialise in this area of practice or you are involved as a practitioner, fasten those seatbelts and get ready and prepared for the future, less back to the future and more back to the present and onto the future.

So what has changed over the last 12-18 months which is of significance? I only intend in this article to set out a summary. I do not intend to provide detail, details of which can be found within the various statutes and regulations covering the statutory provisions and also regulatory guidance from our Regulator, the HCA.

Let’s start with the snappily entitled Deregulation Act 2015. At first glance, deregulation as a word is quite a powerful word and initially, when this Act was a Bill, a lot of people in the sector thought that this would be used to address the private sector rather than the social housing sector, but there have been provisions which have affected day to day housing management practice. The main changes which come to mind are in relation to s.21 notices requiring possession in accordance with the Housing Act 1988. The Deregulation Act introduced for the first time a prescribed statutory notice to be used for fixed term Assured Shorthold tenancies which commenced on or after the commencement provision for the Act (October 2015).

In addition to the prescribed notice, we now have a “use it or lose it” rule whereby once a notice is served, if you choose to issue possession proceedings, you must do so within 6 months of the date of that notice. Further, a s.21 notice cannot be served during the first 4 months after commencement of a tenancy. If enforcement is necessary during that first 4 months, you would have to rely on the service of a notice seeking possession under s.8 of the Housing Act 1988 and relying on the discretionary grounds for possession, usually ground 12 and ground 14 depending on the circumstances of the case.

Bearing in mind the amount of litigation over the years in relation to s.21 notices relating to periodic tenancies and the dates to be used on the notice, I suspect there will be new litigation in relation to the use of the new notice, although the intention of this new notice is to prevent such disputes because it is quite clear that the notice is now prescribed and it is set out in a prescribed format. However, I suspect the confusion will lie where a prescribed notice is used in error in relation to a periodic tenancy. So watch out for developments and any case law in relation to these new provisions.

The next major piece of legislation which has the potential of causing social housing providers administrative and resource problems is the introduction of the right to rent checks under the Immigration Act 2014. Following a pilot of these provisions in various areas around the country, this was introduced across the sector under statutory instrument from February 2016 and the provisions within the legislation and Regulations should be studied and considered because they are very far reaching, particularly if there is a failure to comply, which can result in civil penalty and now, as a result of the passing of the Immigration Act 2016, (at the time of this article it is not in force) has a criminal sanction by way of prosecution for failure to carry out checks.

I do not intend to repeat here the extensive statutory guidance in relation to right to rent checks which is published by the Home Office and which I suggest you read if you are a practitioner within this field, but it is important to note that these checks are not required in those cases where the applicant is nominated by the local authority in accordance with the provisions of the Housing Act 1996. However, after nomination, if the constitution of the household changes, there may be a requirement to carry out a check in relation to adult members joining the household which could be by way of a succession, assignment or upon transfer. The fine detail as to how this may work can be found within the regulations. One moot point in relation to such checks is that it is clear under the Immigration Act 2014 that the requirement to check only applies to tenancies which commenced on or after February 2016. However, it is less clear under the new Immigration Act 2016 as to whether it is confined to those tenancies or whether there is a requirement to check adult household members joining in tenancies which pre-date February 2016. We will have to wait to see what the regulations set out, but on first glance of the new legislation, it seems to suggest that there is a requirement to check, regardless of whether the tenancy started on or after February 2016.

The other important aspect to note is in relation to lodgers. If you are a landlord who permits lodgers, then the onus is on the tenant to check the status of their lodger, it is not on the landlord and there has been some confusion on this point and of course in law it can be quire confusing as to whether somebody is a member of the household or whether they are a lodger. Generally, if they are making a payment or contribution towards the rent and upkeep of the tenancy, they are probably a lodger, but if in doubt, it is important to have information provided to residents so that they are aware of this point.

The theme of this legislation is nothing new and has been a requirement of employers under the employment law as a result of immigration legislation over a number of years. The concern is if these checks are to be extended to tenancies pre February 2016, landlords will need to plan and work out the administration and resource for potentially carrying out these checks. The risks of not complying with both Acts of Parliament can be severe and can result not just in a civil penalty, but also in criminal prosecution. Aside from that, it may even result in negative adverse press which could also potentially result in regulatory attention as a result of the Governance Standard under the regulatory framework.

As mentioned in the introduction, one of the most significant changes to the sector which has rocked the sector and has caused much change management, is the introduction of the reduction in social housing rents under the Welfare Reform & Work Act 2016 whereby there is a requirement over the next 4 years to reduce certain rents by -1%. This was following the Chancellor of the Exchequer’s budget in July 2015 which was a shock and a surprise to the sector and wasn’t something that the sector was really ready for, but which is hopefully now in a position of implementing and rolling this out. You have probably read in the housing press of late, significant commentary in relation to mega mergers which is very much the flavour of discussion, not just mega mergers but mergers and acquisitions in general and this is largely as a result of the introduction of this social housing policy which has a caused a very deep dent in housing providers’ income streams and their business planning. I strongly suggest that you consider the provisions within the legislation and also the very detailed regulations for social housing rents (exemptions) in those provisions (regulation 2016) which came into force on 1 April 2016. There are various exemptions which you will need to consider in relation to this new statutory scheme. The regulations are very complex and I do not intend to summarise those provisions, as that simply would not suffice. One moot point which has appeared from these regulations is the question as to what, if any, of the Rent Standard under the regulatory framework has survived and we will have to wait and see how that develops. On the issue of regulation, there is also the proposal to free up regulation within the sector, but the fine detail is yet to be introduced by way of regulations but it is a proposed statutory provision in the new Housing & Planning Act 2016.

Another major piece of legislation which has involved much discussion and debate within the sector and also by the media is the new Housing & Planning Act 2016. The most contentious proposal within this legislation has been the voluntary right to buy which may apply to all housing associations. Initially when the legislation was travelling through Parliament, there was lots of discussion as to whether or not this should be a statutory right for all housing association tenants mainly as a result of the Government’s manifesto at election time which provided a promise that such a right would be provided. However, following very in-depth discussions and dialogue between the Government and sector leaders, in particular the National Housing Federation, a decision was eventually made that it should be a voluntary scheme. The National Housing Federation published a document which highlights their proposals to the scheme, which is important reading. However, the fine detail of how the voluntary scheme is going to be developed is still being awaited from the Government and only part of the legislation is in force in relation to the Government giving the Regulator power to make grants to compensate for the loss of such stock and also provisions to remove disposal consent requirements. So we wait to see the actual detail. The general gist is that it is expected that where the scheme is entered into voluntarily and the property is sold under voluntary right to buy, then the housing association will be compensated in relation to carrying out this function. One of the new concepts which differs to a large extent from previous right to buy legislation is the notion of a transportable right whereby by example, if somebody cannot buy a property they are residing in because of any exemptions which are proposed under the scheme, such as a rural area, the provider would be required to sell a property elsewhere. We will have to wait to see how this is going to operate under the guidance.

The other proposed change which is worthy of comment under the Housing & Planning Act is provisions in relation to high income social tenants. At the time of writing this article, those provisions are not in force. The general proposal for this part of legislation is that local authorities will be under a mandatory duty to ensure that tenants above a certain income will have to pay market rent and that housing associations will have the flexibility to decide as a matter of policy whether they voluntarily want to apply such a scheme. The nickname of high income social tenants since discussions began has been “pay to stay” and although this is not a new area of policy in the housing association sector, as it has been available as a consideration under regulation, it is something that potentially could pick up momentum, particularly as the Government are very keen for housing associations to adopt such a policy. For local authorities it is going to be a must and this will bring with it its own resource and administrative issues as to how such a scheme can be run, and the same for housing associations should they choose to go down this path. The fine detail is yet to come in by way of regulation and guidance.

Summary

So as can be seen from above, there have been major significant statutory changes both through primary and secondary legislation. For those who practice this area, there has been a lot of reading, probably a lot of sweat and tears in trying to understand some of these provisions and in advising clients, not just in relation to law but on some really big business decisions as to how these statutory provisions will apply. I think with regards to the future, the Government have provided an emphasis in social housing providers focusing more in relation to shares ownership products, market rent products and also looking to strengthen and extend any commercial portfolios so as to strengthen their income streams and continue to operate as viable businesses.

Scott Greenwood is a solicitor at Radian. He can be contacted This email address is being protected from spambots. You need JavaScript enabled to view it..