The Government’s decision to consult on the ending of Section 21 “no fault” grounds to gain possession of a rental property has gained significant media attention since it was announced on Monday the 15th April.
The industry was aware that the Government had Section 21 in its sights, but the announcement came sooner than expected.
The Communities Secretary, Rt Hon James Brokenshire MP, said:
“By abolishing these kinds of evictions, every single person living in the private rented sector will be empowered to make the right housing choice for themselves – not have it made for them. And this will be balanced by ensuring responsible landlords can get their property back where they have proper reason to do so.
“We are making the biggest change to the private rental sector in a generation. We are creating homes, opportunities and thriving communities, where people can come together and put down roots, bound by a strong sense of belonging.
“Everyone has a right to the opportunities they need to build a better life. For many, this means having the security and stability to make a place truly feel like home without the fear of being evicted at a moments’ notice. We are building a fairer housing market that truly works for everyone.”It is clear that the Government’s direction of travel with regards to the private rented sector is to re-balance the relationship between landlord and tenants, giving more power to tenants.
Tenants rights activists are claiming the announcement as a victory although it is not yet a done deal or written into statute.
Industry stake-holders, commentators, and landlords are all very concerned how it might actually work in reality.
Paul Shamplina of Landlord Action described it as a “game changer” while Richard Lambert of the National Landlords Association commented - “If the Government introduces yet another piece of badly thought-out legislation, we guarantee there will be chaos.”
Is Section 21 going to be diluted so that the “no fault” ground is removed or is it going to be abolished completely and repossession moved entirely into the domain of Section 8?
It really isn’t clear at this stage.
What is clear is that nothing is going to happen immediately, as the consultation process is still on-going.
It could take a significant time for this change to arrive in the private rented sector, giving landlords plenty of time to prepare for it.
David Smith, policy director for the Residential Landlords Association, said:
“It is important to note that although the Government has announced it will consult on how to end Section 21 repossessions, this process, together with the consideration and implementation of legislation to achieve it, will take a long time.”
To this end, there is nothing that landlords need to act upon immediately, other than to keep abreast of what is going on in the sector.
Northwood also recommends that all landlords make their views known by contributing to the new consultation that the Government will launch shortly.
For landlords who wish to sell their property or to move back into it, the Government has already made it clear that these are justifiable grounds to serve notice.
Where there lacks clarity is which process landlords will use to evict tenants who are not in rent arrears or who are not damaging the property (which is covered by Section 8).
Issues such as anti-social behaviour or a tenant refusing to admit a tradesperson for maintenance or a gas safety check will need to be addressed.
Very often, it is not one single issue that results in a landlord serving notice. It can be a number of things that build up over time and results in the break-down of the landlord/tenant relationship and the landlord thinking that they can no longer work with that tenant.
These situations - which are far from black and white - will need careful consideration by Government.
There is also the issue of whether BTL lenders will feel happy lending in the sector if S21 is abolished. The growth and competitiveness of BTL financing has been due, in no small part, to Section 21, which gave lenders confidence that they could get possession of a property quickly in the event of a default by the mortgagee.
Lenders will no doubt be invited to be part of the consultation and should have some considerable influence as private sector landlords are needed to assist with housing those people who cannot be accommodated in social housing.
Section 21 is interlinked with many other regulations and statues including tenancy deposit protection, so this is another area that will need to be looked at very carefully as whole tomes of law will need to be amended if S21 is eventually abolished.
You can rest assured that we at Northwood will be keeping abreast of all the changes.
Our in-house legal team are always working on behalf of our landlord clients to ensure that we have the very latest landlord intel and compliance information.
So for now, in our opinion, there is nothing to be concerned about. As with most things in property investment, knee jerk reactions tend to be regretted later.
Landlords should keep their powder dry and wait for clarity over Section 21 before deciding how it is going to affect their views on being a landlord.