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The Deregulation Act could cost you rent

From October, if you seek possession under section 21 and your tenant no longer occupies the property, you should be careful.

The Deregulation Act 2015 amends the Housing Act 1988 in a number of ways, many of which have been discussed at length.

However, there is a provision that has not received much attention:
A new section 21C entitles tenants to a refund of rent in certain circumstances following service of a section 21 notice.

Under this new provision, landlords could lose up to one period worth of rent while the tenancy would still exist (and thus while they couldn’t re-let the property).

Here is the exact wording (s.40 of the Deregulation Act):

21C Repayment of rent where tenancy ends before end of a period

(1) A tenant under an assured shorthold tenancy of a dwelling-house in England is entitled to a repayment of rent from the landlord where—

(a) as a result of the service of a notice under section 21 the tenancy is brought to an end before the end of a period of the tenancy,

(b) the tenant has paid rent in advance for that period, and

(c) the tenant was not in occupation of the dwelling-house for one or more whole days of that period.

One would have understood refunding rent paid for any days after the end of the tenancy.

However this is not what the provision states here: a tenant will be entitled to a refund for all the days they didn’t occupy the property during the last period of the tenancy if the tenancy ends before the end of a period.

Effectively the tenant will still have a valid tenancy but the landlord will not be able to charge rent. Genius.

This will apply if the tenancy is brought the an end “as a result of the service” of a section 21 notice. How to interpret this statement is not entirely clear to me.
Arguably, since a section 21 notice is not a notice to quit, a tenancy is only brought to an end that way as a result of a possession order obtained following such notice.
However, courts might interpret that more widely… We might see clarification in due course.

Additionally, it may be worth noting that, oddly, this new provision will apply only if the tenant “has paid rent in advance”. Consequently if the tenant has stopped paying rent it should still be possible to pursue him for the whole of the rent.

In such circumstances, will landlords start hoping that their tenants stop paying rent? Genius, again.

Is there a way around it?

First, the provision will apply only if the tenant no longer occupies the property. Therefore landlords should pay attention as to whether and when tenants might move out.

Then, the provision will apply only if the tenancy ends before the end of a period. As such, landlords should be careful and avoid that situation, as far as possible.
I don’t know to what extent county court bailiffs can be influenced. I suspect it might be easier, and faster, to work with High Court Enforcement Officers (HCEOs).

The Deregulation Act removes any requirement on the expiry date of a section 21 notice. However, there might be some benefits in still using the last day of a period, just in case the tenant (hopefully) complies with the notice.

Lastly, whilst this new provision is expected to take effect in October, it will only apply to new tenancies for 3 years. Landlords may therefore want to weigh the pros and cons of renewing a tenancy after that date instead of keeping, e.g., a statutory periodic AST. More on this here.