Lifting of the stay: new processes for dealing with possession of property proceedings in UK courts
Real estate investments in the UK remain strong, despite the pandemic. However, whether they are looking to make new investments or manage an existing portfolio, family offices should be aware of how commercial and residential property ownership disputes are currently handled in UK courts.
Adhering to the new rules vis-à-vis existing tenants, and knowing what to look for if new investments are to be expected, is essential for family offices to avoid costly mistakes both in issuing procedures and in the progression of new acquisitions.
Context of the stay
In response to the continued impact of COVID-19, on March 27, 2020, Practice Direction 51Z (PD51Z) went into effect and suspended all possession and enforcement procedures for 90 days. The length of the suspension was changed on April 22, 2020, so that possession proceedings could be initiated in limited circumstances. On June 25, 2020, CPR 55.29 entered into force because the suspension imposed by PD51Z was due to expire. CPR 55.29 extended the suspension of possession procedure until September 20, 2020 subject to the same limited exceptions as applied under PD51Z.
The post-stay process
The stay ended on September 20, 2020 and from that date a new practice direction (PD55C) was applied. PD55C was supposed to apply to possession procedures until March 28, 2021, but this has been extended and will now remain in effect until July 30, 2021.
Possession claims are treated differently under PD55C depending on whether they were lodged:
- Before August 3, 2020
- On or after August 3, 2020, or both cases where a final possession order has been made
Complaints submitted before August 3, 2020
For these claims, the parties are required to file a “notice of reactivation”; otherwise, the case will not be listed, relisted, heard or referred to a judge. For cases where a reactivation notice has not been filed and served by 4:00 p.m. on April 30, 2021, they have been automatically suspended. However, if a reactivation notice has not been served by April 30, 2021, a party can still ask the court to lift the automatic stay.
- A recommended form of reactivation notice has been published and should include:
- Confirmation that the filing and serving party wishes the matter to be entered, relisted, heard or referred
- Other than an appeal, what knowledge the party has of the effect of the COVID-19 pandemic on the defendant or his dependents
- If based on rent arrears and the proceedings do not involve an appeal, an up-to-date rent account for the past two years
- If the case management instructions were given before September 20, 2020, the reactivation notice must be accompanied by:
- A copy of the last itinerary order, accompanied by the new compliance dates, taking into account the stay before September 20, 2020
- A draft order setting out additional or alternative directions or a statement that no new directions are required and that an existing hearing date can be met
Claims made on or after August 3, 2020, or if a final possession order has been made
A reactivation notice is not required for these claims. Instead, the claims will be listed for hearing and the claimant must bring to the hearing two copies of a notice confirming:
- It has complied with the requirements of the pre-action protocol for claims of possession by social landlords (where the protocol is applicable)
- His knowledge of the effect of the COVID-19 pandemic on the accused or his dependents
This notice must be served on the defendant at least 14 days before the hearing. Additionally, if the claimant is using the fast track, their knowledge of the effect of COVID-19 on the respondent and their dependents should be filed with the claim form.
Advice from the Master of the Rolls working group
On September 14, 2020, the Master of the Rolls Working Group on Possession Procedures released guidance on the General Provisions for Possession Procedures (the General Provisions). General arrangements addressed challenges as the stay came to an end. On September 17, 2020, the Master of the Rolls also released a Priority Case Guidance Note reflecting the comments in the General Arrangements.
A summary of the key principles and provisions is presented below:
- Restart and start cases – Business should not be relaunched and no new complaints should be brought without careful efforts to reach a compromise.
- SEO – The court will generally not set a date on which to issue a claim form and the court should give at least 21 days’ notice of a hearing in a suspended claim registered or relisted in response to a notice of reactivation .
- Introduction of COVID-19 box marking – A case can be marked COVID-19 to highlight that it is, or claims to be, a direct consequence of COVID-19. This scheme has a number of objectives, including demonstrating ability to settle, assisting in the monitoring and management of cases by the court.
- Introduction of a revision step – Introduced for all cases and set for at least 28 days before any substantive hearing – in essence, it involves a judge’s review of the evidence in the case. There is also a new home ownership mediation pilot program for home ownership cases, which was launched on February 1, 2021. The parties can agree to refer a case to the program if an agreement is not reached. at the examination stage.
- Prioritization – Priority cases include cases involving suspected antisocial behavior, extreme rent arrears (i.e. (i) 12 months rent or (ii) nine months rent when this is more than 25 % of total annual income of a private landlord (any source), squatters / illegal occupation, domestic violence, fraud / deception, illegal subletting and abandonment of property. In addition, there may be other circumstances warranting priority, and priority will be given to cases issued before the start of the stay in March 2020.
- Eviction notice – When a possession order is made, at least 14 days’ notice of eviction is now required in both the county court and the High Court.
Practical considerations on the post-stay process and pitfalls to avoid from the investor’s point of view
As has been shown, measures introduced due to COVID-19 mean possession procedures can be a complex and lengthy process. In addition, there are still restrictions that prevent obtaining possession when possession is sought due to rent arrears in the context of commercial property and, more generally, in the case of residential property.
Therefore, for an investor seeking to enter the UK property market, due diligence on the property in question will be essential before any purchase and / or investment where tenants are on site. Questions to ask should include whether possession proceedings are currently underway and, if so, whether they are being stayed. In addition, investors should check that tenant rent payments are up to date and whether there have been any issues with the tenant, such as breaches of other lease clauses that may require possession proceedings.
For investors who have already engaged in real estate investments and possession issues have since arisen, relevant considerations include:
1. The parties should take full account of their positions and of the possibility of settling
The General Arrangements make it clear that the parties are expected to try to reach a compromise before beginning or resuming a claim for possession. It seems that the courts will have a bad opinion of the parties who will not have respected this step and will be able to take it into account with regard to the costs. This is also reflected in the introduction of the Home Ownership Mediation Pilot Program. Accordingly, it is suggested that now more than ever, attempts at settlement and proof of such attempts will be essential for any possession claim that a party decides to begin or resume.
2. Priority of cases, COVID-19 marking and impact of the 2020 coronavirus law
Investors should also be aware of the priority of COVID-19 cases and marking in order to be realistic about when and how cases will be handled. While the General Arrangements recognize that there may be other circumstances justifying priority, unless a case is placed on the priority list, it is likely that hearings of such claims will experience delays. A claimant should check to see if their case is on the priority list, which may impact their approach to attempting to resolve cases without resorting to final hearings, especially when delays in cases can be significant.
When it comes to commercial property cases, certain types of cases are included in the priority list, including illegal subletting or abandonment. In addition, cases where there are extreme rent arrears are included. However, the possibility of bringing an action for possession in such cases is currently limited, as the moratorium on the confiscation of commercial leases for non-payment of rent under Article 82 of the Coronavirus Law 2020 has been. extended until June 30, 2021. In addition, for residential properties, there are restrictions in place until May 31, 2021, which prevent attendance at a dwelling house for the purpose of executing a writ or a possession warrant, or to deliver an eviction notice, subject to limited exemptions.
3. Logistics of the suspended complaints procedure
For any party intending to proceed with a suspended claim, it must follow the new procedures under PD55C, including the following key points. It should be clear on the distinctions that apply depending on when the complaint was lodged; in particular, if a claim was originally filed before August 3, 2020, a party should ensure that they have filed and served a notice of reactivation, as the courts will not take any further action on the claim until this is done. not done. Finally, for all suspended claims, at some point, the claimant will need to provide their knowledge of the effect of the COVID-19 pandemic on the respondent or his dependents.
In summary, although the suspension of possession procedure has been lifted, numerous restrictions on law enforcement remain in place as the COVID-19 pandemic continues. The current restrictions should not prevent investment in the UK property market, but foreign investors should ensure that sufficient due diligence is exercised on the property and those who have already committed to a purchase should be clear about the framework current legislation in place for possession procedures.