It’s been a busy year for the lettings industry, with changes to legislation aplenty. We’ve already had the Tenant Fees Act 2019 (aka the fees ban), as well as the introduction of the Fitness for Human Habitation Act. And, in 2018, we also saw changes to the law around managing HMOs.
The latest announcement set their sights on Section 21, better known as the ‘no-fault evictions’ act. Although at present there is no date set and very little detail on what will be changing with regards to landlords rights to evict, the Government are on a mission to change the world of residential lettings.
What is Section 21 and what does the government think is wrong with it?
As it stands, Section 21 allows landlords the right to evict tenants without providing a reason so long as they complete the paperwork, give the tenant 8 weeks’ notice and have served the relevant paperwork* at the commencement of the tenancy. In repealing or reforming Section 21, the government is attempting to protect vulnerable tenants from being evicted at the whim of their landlords. Currently tenancies of 6-12 months make up 81% of the rental market – this government consultation is aiming to increase the number of long-term rentals and stabilize the market.
Could the repeal of Section 21 be a good thing?
- The majority of landlords are keen to increase the duration of their tenancies (the admin at the start of each tenancy costs money and longer-term tenancies guarantee a steady rental income) – legislation that promotes this can only be a good thing.
- It is thought that any reform will still allow landlords the ability to increase rents annually so any concerns that landlords will be fixed to a rent that isn’t in line with market changes are misplaced.
- There are likely to be exemptions for short-term tenancies, like student housing and landlords should still be able to recover their property in instances of unpaid rent or anti-social behaviour. In short, they should still have the same rights available to them under Section 21; they will just be packaged slightly differently.
So what’s the problem?
- Industry experts are already questioning the necessity of the reform. Given that only 10% of tenancies in 2016-2017 were ended by landlords rather than tenants one could argue that tenants are already adequately protected by the existing legislation.
- Being locked into a long-term tenancy without definitive legislation to bring it to a close could put new landlords off entering the buy-to-let market. As the market is already undersupplied, this could lead to higher rents and force even more legislation to correct it.
- The risks associated with longer-term tenancies might also discourage landlords from taking on lower-income tenants; the very tenants the legislation is designed to protect. The current standard 12-month tenancy contract and presence of Section 21 provides landlords with a modicum of comfort when taking on tenants with lower incomes or that require guarantors. Take away Section 21 and you could take away the desire to house them.
What happens next?
The consultation is currently in the very early stages without a date set for its implementation, which means it could be anything from months to years before the proposal gets drafted, let alone ratified. But whatever form it takes and however long it takes to be brought into effect, it could have a profound impact on the market so it’s worth keeping an eye on. For now, watch this space.
*To serve a Section 21 notice, you need to have provided:
- A valid gas safety certificate
- The latest version of the government’s ‘How to Rent’ guide
- An up-to-date EPC for the property
Learn everything you need to know about the impending end of Section 21 by downloading our eBook 'The End of Section 21? 'here.