Abolishing Section 21
This weekend will see the end of the Ministry for Housing, Communities and Local Government’s (MCLG) consultation on abolishing the so-called ‘no fault’ eviction (Section 21) and improving the grounds for Section 8. The consultation has been held not to decide whether to abolish Section 21 but how to abolish it. As a landlord, should you be worried about this upcoming legislative change?
Let’s recap the contrasting perspectives tenants and landlords have on this issue:
Tenants – I made a home out of this property at my own expense, paid the rent on time, been a good neighbour and now I’m asked to leave with only 2 months’ notice. Why? I’ve been the perfect tenant and I don’t have thousands of pounds for another deposit to move elsewhere.
Landlords – It’s my property and increasingly, I feel I have no rights regarding it. Landlords are only human, and our lives change, as do our financial circumstances. I’ve never abused the 6-month break clause and I want good tenants for as long as possible, but I can’t take the risk of never being able to gain possession of my own property. Why should tenants have all the control when I’m the one having to bear the hassle and cost of eviction? There are ever-increasing costs for us, and we are vulnerable to both civil and criminal prosecutions while tenants can act how they please.
Good Intentions, Unintended Consequences
The government’s intention is to make the private rental sector (PRS) a fairer system, to balance the landlord’s right to act in the interest of their business but also for tenants not to face eviction for no good reason at short notice.
What will be the consequences of abolishing Section 21? Some landlords are already spooked and have been serving Section 21 before the change comes into effect. The Conservative Party, which should be in favour of landlords, has been increasingly hostile*, while a Labour government led by Jeremy Corbyn (who has stated Housing will be a priority) would not seek to support landlords.
More landlords are selling their properties, which means less housing for tenants and an increase in rents; this is already in evidence since the Tenants Fees Ban came into effect. Combined with the uncertainty of the economy, landlords will shy away from tenants they perceive as being risky, e.g. those who are on benefits, which can only lead to an increase in homelessness. Is the government building council houses quickly enough? Also, is it not likely that it would be the law-abiding landlords who would leave the sector while the small number of bad landlords would continue to intimidate tenants? The long-term consequences have not been thought through.
Do Not Panic
To serve Section 21 in advance would be premature; the 12-week consultation will take some time to digest. Changing the Assured Shorthold Tenancy structure to an Assured Tenancy will require numerous changes in legislation. Revising Section 8 and setting up an effective court process will take time and funding. Lending institutions that have lent money on mortgages did so with the assumed condition that landlords have the right to repossess their properties – they will have their voice heard on the matter.
The National Landlords Association have estimated that any changes will come into force late 2020 to early 2021 at the earliest, pending other government priorities, of which, there are many with the Brexit fiasco. Even if Section 21 is abolished, there will be an official transition period between six and twelve months.
All this will mean there is enough time to decide what to do without having to make knee-jerk decisions. In the meantime, we at Marybow are here to offer support, whether you are thinking of selling your property or renting it out. It is now more important than ever to have agents who keep on top of legislative changes, and above all, care about your tenants and property.
We offer the peace of mind you deserve. Looking to sell or rent your property? Call us today on 0203 588 5115.
*Anti-landlord measures in the last 5 years include (non-exhaustive):
• Section 21 – disallowing of finance costs
• Additional 3% SDLT
• Extra 8% CGT when selling a property
• Tenants Fees Ban
• HMO regulation changes, including minimum room sizes
• Right to Rent checks – now shown to be discriminatory
• Benefit tenants migrated to Universal Credit
• Scrapping Wear & Tear allowance
• EPC minimum requirements, which can be difficult to meet in older/listed properties
• Fitness for Human Habitation
• 100% council tax on void properties
• Rogue landlord database
• Compulsory redress schemes – agents only but also debated for landlords
• Limit on tenant deposit
• Potentially more – Rent controls, right to buy for private tenants, indefinite tenancies, capital gains taxed at your highest rate of income tax, landlords to pay tenant council tax as ‘progressive property tax’, etc.