No more section 21?
If you’re in the buy-to-let market, you are probably already aware of the significant section 21 changes proposed to tenancy termination. Back in April 2019 the Government announced plans for the removal of Section 21, declaring it to be ‘the biggest change to the private rental sector for a generation’.
The decision to propose these section 21 changes is designed to give greater protection to both parties but I feel there is question over who this actually favours. Seemingly the change is more biased toward the Tenant, leaving Landlords feeling nervous that this could be contractually problematic.
In some reports, Landlords are even considering getting out of the market altogether.
Section 21 changes explained
Originally introduced in 1989, section 21 was set up to give private landlords the right to terminate tenancy and repossess their property with a minimum of 2 months written notice.
Applying only to shorthold tenancy agreements, Section 21 has for the past 30 years given landlords the right to quickly remove tenants from a property by legitimately terminating their agreement.
Reasons for a tenancy termination can range from grievances with tenants through to the landlord simply wanting the property back to sell or to move in to.
The government is proposing to abolish Section 21 in the private rental market, favouring an improved court system to ensure landlords can go for repossession through them in fair cases. However there is concern that this court system may not be ready in time.
What the Section 21 changes mean for Tenants
The proposed removal of section 21 notices will effectively create open-ended tenancies, giving tenants and families more protection in their places of residence and more certainty over their future living arrangements.
While landlords can still evict clients for a host of legitimate reasons, such as property damage, anti-social behaviour and payment arrears, they will no longer be able to enforce ‘no fault evictions’.
A no fault eviction is when a Landlord unfairly imposes a repossession for a property without a justified reason. This has in many cases led to abuse of the system, with families being evicted, despite complying with their contract terms. Understandably tenants can feel insecure about their living arrangements.
The government’s proposal to abolish section 21 has received cross-party support for Tenants.
Back when this was originally proposed, Theresa May made a statement saying:-
‘Everyone renting in the private sector has the right to feel secure in their home, settled in their community and able to plan for the future with confidence.
But millions of responsible tenants could still be uprooted by their landlord with little notice and often little justification.
This is wrong – and today we’re acting by preventing these unfair evictions. Landlords will still be able to end tenancies where they have legitimate reasons to do so but they will no longer be able to unexpectedly evict families with only 8 weeks’ notice.
This important step will not only protect tenants from unethical behaviour but also give them the long-term certainty and the peace of mind they deserve.’
What the removal of Section 21 means for Landlords
While the decision to increase the protection of our nation’s renters provides more security for them, the news might not be so good for landlords. The laws already carry a level of bias towards tenants and evictions are often strung out and require court action.
The announcement of the removal of section 21 has seemingly caused some backlash from landlords, who feel this will abolish their rights.
The National National Residential Landlord’s Association (NRLA) stated that before Section 21 is removed, a better court system needs to put in place to protect Landlords pushing for repossession.
According to government data, it currently takes over five months from a private landlord applying to the courts for repossession to the repossession actually taking place.
That’s with Section 21. Following the removal, this process could be longer and more laborious.
On the flip-side, landlords will benefit from greater rights, with a proposed tightening of section 8, to help them to quickly seize back possession of a property in the event of a breach of contract.
The knock on effect on the rental market of these section 21 changes
Regardless of the government’s intention to make this process fair for both parties, there’s no denying that Landlords are nervous.
Many of the comments on similar news articles about the removal of Section 21 suggest that it’s going to be more trouble than it’s worth. Some Landlords have stated that they plan to leave the rental market altogether.
This could ultimately be bad news for Tenants in the long run.
If the buy-to-let market decreases, there will be a reduction in rental properties available for those who cannot afford to get on the property ladder and are forced to rent. We could also see a rise in rents as the demand for rented accommodation increases.
This view is shared by the NRLA. David Smith stated:
“With the demand for private rented homes continuing to increase, we need the majority of good landlords to have confidence to invest in new homes. This means ensuring they can swiftly repossess properties for legitimate reasons such as rent arrears, tenant anti-social behaviour or wanting to sell them. This needs to happen before any moves are made to end Section 21.
For all the talk of greater security for tenants, that will be nothing if the homes to rent are not there in the first place. We call on the government to act with caution.”
The Last Word
The effects of this change remain to be seen but I can’t help feeling there will be a domino effect.
I guess it’s going to be a case of ‘watch this space’ until we know more.
Further Advice on Buy-To-Let
For further advice, see how THP can help BTL Landlords.
About Jon Pryse-Jones
Since joining THP in 1978, Jon Pryse-Jones has been hands on with every area of the business. Now specialising in strategy, business planning, and marketing, Jon remains at the forefront of the growth and development at THP.
An ideas man, Jon enjoys getting the most out of all situations, “I act as a catalyst for creative people and encourage them to think outside the box,” he says, “and I’m not afraid of being confrontational. It often leads to a better result for THP and its clients.”
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