Learn here why UK government plans to “Abolish Section 21 No Fault Evictions” will force landlords into handing over their properties with open-ended tenancies - - - - -
Section 21 Abolished
Section 21 Notices Or So Called “No Fault Evictions” Are Almost Certain To Be Abolished after a consultation process was announced by the then Prime Minister Theresa May in April 2019. This consultation period covers England only and runs until September 2019.
If and when section 21 is abolished - this will effectively create open-ended tenancies. Meaning landlords will then need a very good reason to get their properties back from tenants.
In effect it will bring to an end Assured Shorthold Tenancy agreements (AST's). And concerns are high among landlords that they will then have to rely on the much maligned section 8 eviction process (evictions with fault) - which they feel is inadequate.
However the consultation process also indicates that the Section 8 process and court proceedings will be updated and realigned - to enable a landlord to regain possession when they need to. For example when there are rent arrears. Or when they want to live in the house themselves
We’ll examine the abolition of section 21 in the detailed report below – where you’ll learn:
5 minute read
What will it mean if section 21 is abolished?
If section 21 is abolished then it will mean the end of Assured Shorthold Tenancy (AST) agreements which were first introduced as part of the housing act 1988.
The arrival of Assured Shorthold Tenancy agreements which utilised "section 21 no fault repossessions" gave birth to the Buy to Let boom. This boom was positively encouraged by successive UK governments who incentivised private landlords to buy houses - and let them to tenants.
This was seen as helping to make up for the chronic shortage of affordable rental properties. Caused by successive UK governments not building enough houses for people to rent.
What will replace the AST?
The proposal to abolish section 21 will mean the only contract a landlord or letting agent will be able to use to let out their properties - will be an Assured Tenancy agreement.
NOTE: An Assured Tenancy Agreement isn't new - it's just not been used extensively as landlords prefer to use the Assured Shorthold Tenancy agreement.
- EXISTING - Assured shorthold Tenancy agreement with 2 ways of ending a tenancy. (1) Issue a section 21 - no fault eviction. (2) Issue a section 8 - fault eviction.
- FUTURE - Assured Tenancy agreement with 1 way to end a tenancy. Issue a section 8 - fault/other reason eviction.
It's proposed that this Assured Tenancy agreement will mean giving a tenant either a fixed term of a much longer duration than the current 6 or 12 months. Or instead a Periodic Assured Tenancy.
When a fixed term Assured Tenancy expires it can either be replaced by another fixed term Assured Tenancy or roll onto a Periodic Assured Tenancy.
What about existing "Assured Shorthold Tenancies"?
When the new rules come into effect - existing Assured Shorthold Tenancy agreements will remain exactly as they are and WILL NOT automatically revert to being Assured Tenancies.
So to be clear - the new changes WILL NOT be applied retrospectively to existing AST's.
How can the new Assured Tenancy agreements be ended?
The BIG change is that unless there's a clearly defined FAULT from the tenant, then the landlord CANNOT simply ask for their property back without a CLEAR REASON (we'll list these reasons below) - using the revamped section 8 procedure.
The tenant CAN HOWEVER STILL give a landlord 1 month's notice to quit - and move on whenever they like. However they can't do this if they're in the middle of a fixed term Assured Tenancy.
Revamped section 8 procedure
As mentioned the landlord will have to use the section 8 procedure to bring a tenancy to an end. The scope of section 8 is expected to be upgraded with additional grounds to take back the property.
These proposed terms are:
- When the landlord wants to sell the property.
- Should the landlord want to live in the property.
- When a member of the landlord's family wants to live in the property.
- When the tenant is in rent arrears. The tenant must be 2 months in arrears at notice. And 1 month in arrears at hearing. And the tenant has a limit of 3 repeat offences - so they can't keep doing this continuously.
- When the tenant is involved in antisocial behaviour.
- When there is domestic violence taking place in the property. And with the ability to evict just one party (the perpetrator of the violence presumably) and not just evict the entire household.
- When the tenant persistently refuses access for repairs / safety checks.
It is anticipated that the courts will be given extra capacity to allow them to cope with all the extra section 8 proceedings. And to allow the courts to deliver speedier outcomes overall.
Prescribed information requirements
It is also anticipated that the existing prescribed information requirements to be able to issue a section 21 notice will be included for any section 8 notice.
What this means is that in order to submit section 8 proceedings you must have supplied the tenant with a copy of the following information at tenancy start. And you must update the information as necessary throughout the tenancy.
- Gas Safety Certificate (renew and update every 12 months)
- Approved Deposit Certification (do this at tenancy start)
- Valid EPC (lasts 10 years)
- How to Rent Guide supplied to tenant (supply latest copy at tenancy start)
TIP Ensure the tenant signs to say they've received copies of the above 4 items - as your proof.
Are there any exceptions to the new rules?
It is unclear how certain types of rentals will be covered such as:
- Houses of Multiple Occupation (HMO)
- Student rentals (HMO)
- Holiday lets
- Lets for work contracts
Our thoughts - section 21 changes 2019
Here at Property Portfolio Sales we’re portfolio landlords too. So all of these new rules affect us the same as for any other letting agent or landlord.
So here’s our thoughts:
These new rules have undoubtedly come about because of lobbying by tenant groups, shelter etc who complain about tenants only ever having 2 months of security. Meaning its hard for tenants to put down roots and provide any stability.
We 100% agree with this – tenants need stability.
Let’s face it the UK media have little sympathy for us “greedy fat cat landlords”. And they constantly malign landlords by accusing them of using section 21 extensively for “revenge evictions”.
Section 21 - revenge evictions
For example it's alleged that if a tenant complains to a landlord of a maintenance issue - then rather than fix the issue the landlord will simply issue a section 21 to get rid of them - out of revenge.
I'm sure this happens and this is wrong, but to suggest that section 21 is used extensively for "revenge evictions" simply isn't born out by any data.
Instead the date shows that section 21 is mainly used to get rid of "problem tenants". And by "problem tenants" we mean those who stop paying their rent. And those who willfully damage their properties etc.
We don't mean those who have genuine maintenance problems.
Section 8 - inadequate
Right now the correct route to evict "problem tenants" is via the section 8 "fault eviction" procedure which takes months. And can easily be challenged by tenants to lengthen the eviction process.
And so landlords instead issue a section 21 notice to get possession in 2 months.
CANNABIS FARM - I have a landlord friend who let 2 houses to seemingly good tenants who paid months of rent up front - sounds good doesn't it?
And then these tenants turned their houses into cannabis farms. Causing thousands of pounds of damage. The landlord was unaware what was going on as they thought they had a good tenant who had kindly paid in advance.
DOG LEFT IN HOUSE - At another house I witnessed a dog frequently left alone for days at a time that soiled and chewed every square inch of the property. When this property was eventually repossessed - this former lovely house was destroyed.
And the tenant had also kindly super-glued their key in the lock. Probably due to their annoyance at being evicted for not paying their rent for 8 months.
Landlords also need protection
So the point I'm making here is that yes tenants have to be protected and enjoy a decent living standard without fear of a "no fault eviction" via section 21.
But landlords also need protection from tenants who will see the abolition of section 21 and the introduction of open-ended tenancies as a sign of weakness - to exploit and pay less rent and cause more damage.
So section 21 cannot simply be abolished without there first being robust counter measures to protect landlords too.
Landlords may decide to sell up
Some landlords may ultimately decide that removing section 21 evictions - on top of a multitude of other tax increases and regulations - means it isn't worth being a landlord any more.
And many more landlords will decide to quit the business. Which of course doesn't help the rental housing shortage of UK plc one bit.
Conclusion - Section 21 abolished
If and when section 21 is abolished, this will effectively create open-ended tenancies – meaning landlords will then need a very good reason to get their properties back from tenants.
In effect it will bring to an end Assured Shorthold Tenancies (AST’s). And concerns are high among landlords that they will then have to rely on the much maligned section 8 eviction process (evictions with fault) – which they feel is inadequate.
So landlords need to be aware of this change now. Because unless there’s a monumental shift in UK government thinking (of all political parties) – then landlords are soon going to lose the ability to take possession of their own properties.
Which is actually quite frightening given that landlords have invested thousands of pounds to buy these properties.
And now tenants will largely be calling the shots.
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Phil Calladine - portfolio consultant