In what has been described as the biggest potential change to the private rental sector for a generation, the government is holding a consultation on its proposals to abolish section 21 notices.
Section 21 notices, otherwise known as "no-fault" evictions, enable landlords to terminate Assured Shorthold Tenancies ("ASTs") on or after the end of a fixed term by giving at least two months' written notice before obtaining a court order for possession if the tenant does not vacate in accordance with the notice. Crucially, there is no requirement for the landlord to provide any reasons for it requiring possession
The alternative option currently available to landlords is to terminate the AST during (or after) the fixed term by serving a Section 8 notice as a precursor to obtaining a possession order if necessary. However, the landlord must be able to rely upon one of the statutory grounds when using the section 8 procedure and so the procedure is generally only used when the tenant is at fault (for example, if there are rent arrears). It is generally considered to be a riskier process for landlords and is often more costly
The proposals are part of the government's wider package to tackle the housing crisis, increase tenant security and balance the bargaining power between tenants and landlords.
Under the new proposals, the government proposes to put an end to "no-fault" evictions by repealing section 21 of the Housing Act 1988 – going forward, a landlord would not be able to evict a tenant without good reason. Landlords would continue to have the ability to evict tenants (by serving a section 8 notice) where the tenant breaches the AST terms, where rent is in arrears or where the landlord plans to sell the property or live in the property itself. The proposals do not, however, provide a platform for the landlord to terminate the tenancy for purely commercial reasons – usually because, if it wishes to rent to another tenant for an increased rent.
However, rent reviews will continue to be allowed annually, restricted only by the opportunity for the tenant to challenge the new rent should they not agree that it reflects market value. Therefore, landlords should be able to ensure that they are receiving the market rate for their properties.
The government has suggested expediting the court process to allow repossession of property in the event that the tenant is in rent arrears or has damaged the property. However, in the light of the very poor current resourcing of the court system, this seems somewhat aspirational and proposals to "digitise the court process" and "provide better guidance" do not provide much comfort.
Disaster for Landlords?
Whilst the proposals are purposely favourable to tenants, it remains to be seen whether they would substantially affect a tenant's position in reality.
The National Landlords Association has criticised the proposals as effectively creating indefinite tenancies. However, by using the example of Scotland (where the same proposals were implemented in 2017), it is foreseeable that landlords will seek to mitigate this risk by exercising their right to review rent annually – thereby ensuring that they continue to receive the market rate. This may lead to greater numbers of tenants ending their occupation and, in effect, keep the market functioning.
However, where a landlord is faced with the potential of an indefinite tenancy, it is far less likely to take on a tenant who it perceives as "risky". It is therefore likely that tenants will face increased scrutiny during the due diligence process and landlords will perhaps seek lengthier and stricter guarantees.
The consultation closed on 12 October 2019 and its outcome is awaited.
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