The Pre-Action Protocol for Possession Claims is coming to the PRS –what does this mean and what can be done now

15th May 2020

 

What is the current Government position?

Housing Secretary Robert Jenrick revealed last week that the Government is working closely with the Lord Chief Justice to ensure that a Pre-Action Protocol for the Private Rented Sector (PRS) is put in place when the current “eviction ban” is lifted.

Mr Jenrick told MPs that the Pre-Action Protocol will apply at the end of the moratorium on evictions, whether that’s in late June or later in the year, if the moratorium is extended.

Mr Jenrick said the Protocol will enable tenants to have an added degree of protection, because instead of embarking upon the eviction proceedings immediately, there will be a duty upon landlords to reach out to tenants to discuss their situation, and try to agree an affordable repayment plan. He further suggested that this will enable tenants to remain in their homes, and to deal with the rent they haven’t been able to pay because of their circumstances.

What are the current restrictions and changes to possession proceedings during the Coronavirus pandemic?

At present the Coronavirus Act 2020 has imposed a statutory notice period of three months for both section 21 and section 8 notices. This is for notices served between 27 March and 30 September 2020 (although the latter date may be extended).

In addition, the Ministry of Justice released a new Practice Direction which requires Courts to place a ‘stay’ (a hold) on all claims filed within a 90 day period commencing on 27 March. Claims will still be issued by the Courts, however no further action to progress the claim will be permitted during this 90 day moratorium period.

What happens now (and pre-Coronavirus) in the Private Rented Sector regarding rent arrears?

At present, a PRS landlord is not required to comply with a Pre-Action Protocol before possession proceedings for rent arrears are commenced. There is however a statutory notice (under section 8 Housing Act 1988) which must be served upon the tenant to notify them that the landlord intends to seek possession via the court should the arrears not be repaid before a set date. The notice period is 14 days (as stated above, this notice period has been temporarily extended under the Coronavirus Act 2020 to three months).

In practice, a section 8 notice is usually served when the tenant has a rent arrears of at least 2 months.  In addition, there are often some communications with a tenant before a landlord decides to serve a section 8 notice, in an attempt to resolve matters.  The notice is usually served as a last attempt to highlight the seriousness of the arrears situation to the tenant and to prompt them into to properly addressing the arrears.

How does this differ in the Social Housing Sector?

Social Housing providers are required to comply with the ‘Pre-Action Protocol for Possession Claims by Social Landlords’ (“the Protocol“). This is a set of rules which is intended:

(a) to encourage more pre-action contact and exchange of information between landlords and tenants;

(b) to enable the parties to avoid litigation by settling the matter, if possible; and

(c) to enable court time to be used more effectively, if proceedings are necessary.

This Protocol applies in respect of the landlord’s actions both before and after service of the section 8 notice.

How could the Protocol be applied in respect of the PRS?

To comply with the Protocol, it is likely that a PRS landlord will need to demonstrate it has exhausted all reasonable options to resolve the arrears situation with the tenant, before court proceedings are commenced.

Professional landlords and property managers usually have an arrears process involving various methods of contact with the tenant to some degree already. The change in procedures/workload may not therefore be significant, but timings and record keeping will need to be adjusted, along with further consideration of what extra support might be given to the tenant to reach a solution regarding repayment of arrears.

Increasing the frequency of attempts to communicate with the tenant (who due to Covid may be relying on or eligible for state benefits) and ensuring the tenant is provided with as much support as possible to assist with a solution, will therefore be key to compliance with the Protocol.

What could this increased communication look like?

• Communications with each named tenant individually (rather than addressed jointly).
• Provision of easy to understand rent account statements showing all payments due and any payments which have been received (separated by those directly from the tenant and those paid via Housing Benefit), along with a running balance of the arrears.
• Asking the tenant if there is an ongoing Housing Benefit claim in progress which is likely to pay the arrears and /or future rent payments and, if not, asking them if they would like help with the application or signposting them to an advice agency or charities that could provide help with claiming any applicable state benefits.
• Consulting with the local housing authority (with the tenant’s permission) on any solution they can assist with, such as a discretionary housing payment to pay down the arrears.
• Making an application to Universal Credit (or the Local Authority if they are still managing the payment) under Housing Benefit Regulations 2006 for direct payment to the landlord of any housing benefit element the tenant is receiving.
• Asking the tenant to complete an income and expenditure form and/or to make a repayment plan offer for consideration.

The Protocol currently requires the landlord to conduct the initial communications with the tenant before the statutory (section 8) notice is served and, following that notice, further communication is required before court proceedings are commenced. As the section 8 notice period is currently extended from two weeks to three months, this time based structure may differ when the full details of the PRS Protocol are announced.

What about Universal Credit / Housing Benefit claims?

The current Social Housing Protocol states the following in respect of Universal Credit or Housing Benefit claims:

“Possession proceedings for rent arrears should not be started against a tenant who can demonstrate that –

• the local authority or DWP have been provided with all the evidence required to process a housing benefit or universal credit (housing element) claim;
• there is a reasonable expectation of eligibility for housing benefit or universal credit (housing element); and
• they have paid other sums due that are not covered by housing benefit or universal credit (housing element).“

Replication of this directive regarding non-issue of proceedings in the PRS context could well lead to significant delays in respect of landlords being able to progress arrears cases to Court. The financial implications would therefore be significant.

What may happen if the PRS Protocol is not followed?

As the law currently stands in the Private Sector, where possession is sought on the basis of rent arrears relying on the mandatory ground (Ground 8) a Judge is required to make an outright order for possession, so long as the landlord can demonstrate the requirements of that ground have been met (i.e. at least 2 months arrears when the notice is served and also at the date of the possession hearing).

Unless new legislation is introduced to temporarily suspend the use of Ground 8 for any arrears that have accrued for Covid-related reasons, there is no statutory basis a Judge could refuse to make an outright order for possession where Ground 8 applies, even if the PRS Protocol is not followed.

Non-compliance with the Protocol in an arrears case may however impact upon the costs order the Court may make or it may influence the use by the Court of its limited “exceptional hardship” statutory discretion in Ground 8 cases (under section 89 of the Housing Act 1980) to delay the date for delivery of possession under the court order by up to 6 weeks (rather than the usual 14 days).

What should PRS landlords and Property Managers be doing now to prepare for the introduction of the Protocol?

The detail regarding the application of the Protocol to the PRS is unlikely to be released much before the expiry of the existing Court moratorium on 25 June (or any Government extension of that date).

PRS landlords and their operators/property managers can however review their current arrears policies/procedures/template documents and think about how they should be adapted to comply with the enhanced tenant consultation that the PRS Protocol is likely to require (based on what is already in the existing Social Housing Protocol).

Once the PRS Protocol is introduced, it will also be important to demonstrate compliance with it in the event that court proceedings are commenced. An appropriate checklist will be an invaluable tool in that regard. It will also be a means of ensuring the interactions with the tenant regarding the arrears are Protocol compliant (both before and after service of a section 8 notice) and that a case can safely proceed to Court without delay and without risk of any adverse order due to non-compliance.