Good news from the courts on evictions

The Court of Appeal has ruled in favour of the landlord in a Section 21 eviction case, where a copy of the gas certificate was not issued, prior to the tenant taking occupancy of the property.

In the case ‘Trecarrell House Limited versus Patricia Rouncefield’, Ms Rouncefield moved in to the property, in February 2017. The gas safety certificate was not issued until nine months later, in November of that year, but the certificate provided was dated January 2017.

In May 2018, a Section 21 ‘Notice to quit’ or ‘no fault eviction’ was served by the landlord. Ms Rouncefield challenged this in court, on the basis that she had not been given the certificate prior to moving in. As such, her assertion was that the landlord should not have been eligible to serve notice.

Initially the Deputy District Judge upheld the case. Had that ruling held, the consequence would in essence have been to give the tenant permanent right to reside in the property.

However, when Lord Justice Pattern later heard the case on appeal, he found in favour of the landlord.

The ruling from Lord Justice Pattern is as follows:

“Although the point is not straightforward, I am not therefore persuaded that for the purposes of Section 21 the obligation to provide the gas safety record to a new tenant prior to the tenant taking up occupation cannot be complied with by late delivery of the gas safety record.

“Late delivery of the document does provide the tenant with the information he needs. If a breach has the consequence for which Cherry contends then that must apply in every case of late delivery even if the delay is only minimal. This seems to me an unlikely result for Parliament to have intended particularly in the light of the express rejection of the 28 day deadline under paragraph (6)(a).

“Many ASTs are granted for fixed periods of one year or less so that in practice the landlord’s inability to rely upon section 21 will provide a strong incentive for the timely compliance with paragraph (6)(b).

“As a matter of construction, I, therefore, prefer the view that as a result of regulation 2(2) the time when the landlord “is in breach” of paragraph (6)(b) ends for the purposes of Section 21 once the gas safety record is provided.”

It is still the intention of the government to end the Section 21 eviction process and all eviction actions remain on temporary hiatus because of Covid-19. However, this ruling does offer good news for landlords.

As long as a compliant gas safety certificate is provided to the tenant, before a Section 21 notice is issued, the implication is that (whilst not ideal) the case would stand.

The current ruling will be a relief for those who have a compliant gas safety certificate, but forgot to give it to the tenant, or find the tenant says they did not receive it at the start of the tenancy.

The decision reached by Lord Justice Pattern could be appealed, so it is certainly a case to be monitored closely.

Record-high private rents in England

The Office for National Statistics (ONS) has reported that, at an average of £700 per month, private rents in England have not been higher.

The data represents the average, recorded over the period 1st April 2019 and 31st March 2020.

Regional variation in rents

As is to be expected, the average rent of £700 comprises significant regional variation, in rental prices.

In London, the median monthly rent was £1,425. Westminster represents the most expensive location in England to rent, with a median of £2,492 per month.

By contrast, within inner London, Lewisham had the lowest median rent at £1300.

In outer London, the highest median rent was in Richmond upon Thames, at £1,550. Bexley, Croydon and Sutton shared the lowest median rent at £1,100.

In terms of regions, the South East came second to London, with a median monthly rent of £900.

There is a marked difference between rents in the capital and the second placed region - £525 between the median for the South East and London, clearly demonstrating the premium price of rent in the city.

By contrast, the North East was the region with the lowest median rent, at £495. Within that area, Hull came in the lowest at an average of £420 per month.

This puts the difference between highest and lowest average rents at £2,072.

Source: Office for National Statistics “Private Rental Market Statistics”, published 17th June 2020

Rent variation by property size

Properties with the greatest number of bedrooms are naturally the most expensive in terms of rent. There is broadest variation in this category too, because vary large properties are included within this data.

The greatest difference in median rents was between the single room and studio sized properties. The ONS believe the volume of studios located in London that are included within this data set influences this.

Section 21 ban will not be brought forward

Housing minister, Christopher Pincher, has responded to calls from the Labour party to bring forward the abolishment of the Section 21 no-fault eviction.

Mr Pincher has made clear that he will not be rushing the process, rather it would happen in a ‘safe sustained and sensible’ way.

Labour’s Dr Rupa Huq, raised the subject of Section 21 in parliament.

Sharing the question she raised on her Twitter feed, Dr Huq said:

“I cited @MarcusRashford on family poverty in covid to minister & asked that promised end of section 21 evictions happens immediately as @CitizensAdvice @Shelter recommend, many renters have kids”

Huq expressed frustration in her post that Pincher did not offer a date for the removal of Section 21:

“He waffled on but gave no date for when”

Mr Pincher reiterated that the Conservatives were committed to bringing forward legislation to protect tenants, including removing the Section 21 evictions, but he did not say he would bring its abolishment forward.

Pincher also referenced that information given to him from the NRLA showed that rents have fallen by around 1%.

Whilst it is good news for landlords that abolishing Section 21 will not be brought forward, it is only a temporary easement, as it was reiterated that the abolishment would still go ahead.

Thangam Debbonaire, shadow housing minister for Labour, challenged the Mr Pincher to act now, to prevent an evictions crisis in the autumn, given the number of people who have ‘fallen through the cracks’ of government support.

In response, Pincher said that to pile up costs for those who could not afford it was the wrong approach. He urged Ms Debbonaire to “go away and think again”.

£78,100 average capital gain for landlords

84% of landlords, who sold property in 2019, made a profit. The average capital gain on property sales, for landlords, was £78,100.

Whilst the 2019 figure was down 3% on 2018, this still represents a 42% gross capital gain on investment.

These figures are from buy to let properties in England and Wales, provided by estate agent Hamptons International.

Capital gains differ considerably when it comes to the location of the property.

In London, the average gross capital gain was £253,580. Hamptons International data showed that the top 15 local authority areas, with the biggest gains, were within the M25.

By contrast, in the North East, the average capital gain was £11,710.

Property ownership averaged at 9.1 years, demonstrating very clearly that achieving a capital gain from rental property generally requires a long-term investment strategy.

Capital Gains Tax (CGT) is only payable once a property has sold, within 30 days of the sale, under new HMRC rules.

CGT is a significant cost, so being clear on the amount applicable is vital to financial planning.

Basic rate taxpayers are charged 18% CGT. Higher or additional rate taxpayers are charged 28% CGT.

Aneisha Beveridge, head of research at Hamptons International said:

“The profitability of the buy-to-let market has been questioned in recent years and is one of the main reasons why some landlords have chosen to sell up.

“But one of the biggest bonuses from cashing in comes from the capital gain on a property. Over a third of landlords’ total return comes from capital growth rather than rental income in Great Britain.”

Ms Beveridge went on to highlight how buy to let strategy can vary geographically:

“Landlords in the South, where house prices are higher and historic price growth has been stronger, saw the greatest capital gains last year. In fact, the average London landlord gain was over 20 times that of a seller in the North East where landlords are more reliant on rental income.”