Uncertainty over Section 21 plans. Three questions the Government must grapple with.

Three Big Questions the Government Needs to Answer about Section 21

Our May newsletter revealed that a 90% of landlords oppose the Government’s plan to end Section 21 evictions. Over 800 landlords voted in our poll, making it a very credible assessment of the mood on this issue.

What is Section 21? Quick summary here

Nevertheless, there seems to be little chance that the plans will be halted. Theresa May has re-stated the commitment several times since the first announcement.

OpenRent understands from discussions with campaigners and civil servants that the new rules will be in place in two to three years’ time.

At that point, landlords will no longer be able to evict tenants simply by serving notice, but will instead need to demonstrate that grounds to evict exist. They will have to rely on the Section 8 eviction process, which currently takes much longer and requires the provision of evidence to a court.

Three Huge Questions to Answer

There is very little public information on the details of the plans. But there are three key questions that will have to be answered before long. Each will have a huge impact on the future of being a landlord in the UK.

Question One: Repeal the Whole Act? Or Just Section 21?

The Government’s promises focus on ending ‘no fault evictions’ and improving ‘tenancy security’. Section 21 is mentioned specifically.

But Section 21 is just one part of the Housing Act (1988). It is unclear whether the Government hopes to take a pen and cross out Section 21, leaving the rest of the Act untouched, or whether it wants to replace the entire Housing Act.

In Scotland tenants already have unlimited tenure. Can we look north of the border for a clue about England and Wales’ future?

Unlimited tenure was achieved in Scotland with an entire new Act. The Private Housing Act (2016) created a new type of tenancy, the Private Residential Tenancy (PRT) which replaced the Scottish version of the Assured Shorthold Tenancy (AST).

Once in a PRT, the tenant cannot be evicted unless the landlord can demonstrate some grounds for eviction exist.

In other words, Scotland took the radical route. It created a whole new Act to govern renting. Is this a hint that England and Wales will do the same?

Question Two: Will Rent Increases Be a Backdoor to Eviction?

Let’s imagine that Section 21 is simply ‘crossed out’ but the rest of the Housing Act remains in place.

Could landlords just increase the rent to the point that the tenant is forced to leave the property? Some tenants’ rights advocates are arguing that this is a real risk and should not be allowed.

But is this eviction-by-rent-increase route even plausible? I don’t think so. There are already systems that make it very hard for landlords to increase their rent an unreasonable amount.

Landlords can initiate a rent increase by activating a rent review clause or by serving a Section 13 notice form. But the tenant can contest these increases by referring them to a tribunal. The tribunal may reverse the proposed rent rise if they think it is unfair and not in line with the market rates.

It is important to remember, however, that many tenants are already finding their rents unaffordable. Housing costs are taking up an increasing percentage of earnings, and rents have increased faster than wages in recent years.

This means that even small rent increases could be enough to force tenants to move. And it is the poorest renters who are most vulnerable. Even a 2% rise in annual rent could be the difference between just about managing and being forced into debt.

As the PRS grows, more low-income and benefit-claiming tenants are relying on rented accommodation. So the type of increases needed to price a tenant out of the property may be much smaller than some might assume.

Question Three: Will Break Clauses Be Permitted?

Break clauses have been part of ASTs since their inception. We think they are a good thing — we include a six-month break clause in our AST as standard (although it can be removed).

But clearly, break clauses are a way for the landlord (and tenant) to unilaterally end the tenancy within the fixed term. Will this still be allowed when Section 21 is scrapped?

The Government’s answer is crucial.

  • If they are banned completely, then landlords and tenants will lose the useful ability to come to a mutual agreement that each party has equal powers to end the tenancy at a clearly defined point in time.
  • If no changes are made, then banning Section 21 evictions will not ensure the ‘security of tenure’ the Government has told us it wants to achieve.

Getting this right is very important to the future of renting.

When Will Section 21 Will be Repealed?

The next step is for the Government to launch its consultation on Section 21 repossession reform. This will happen very soon. As a landlord, you will be able to submit your views to the consultation. We will share the link to the consultation form as soon as it goes live.

It is a time of regulatory uncertainty for landlords but also a time when high street agents are raising their fees. So who will help landlords keep up to date with new regulations?

OpenRent can take care of a huge bulk of your landlord responsibilities, helping keep you compliant with all the new laws that are on the way.

You don’t have to choose between being ripped off and being compliant!

Notable Replies

  1. You’re a bit behind the news curve. Theresa May has now said Section 21 is likely to be scrapped around the end of this year, I believe. Landlords need to start taking evasive action now - whatever form that might take - in the face of this attack on our private property rights.

  2. Gareth2 I hope you are right but she wont be around so who will?

  3. There is another question that needs to be raised. Some properties are rented to tenants when the owners relocate to another country due to work commitments, there doesn’t seem to be an appropriate mechanism to allow owners to re-occupy their family home should circumstance dictate. In France landlords could evict tenants quickly if the property was for the owners or their immediate family. I would like to see such clauses inserted in to tenancy agreements in the future to protect the family home!

  4. Avatar for Sam Sam says:

    Hi Gareth, I’m not so sure things will happen that quickly. The Tenant Fees Act was promised in Autumn of 2016 and has only just come into force.

    Ultimately though, who knows!

Continue the discussion at community.openrent.co.uk


Avatar for Sam Avatar for Colin3 Avatar for Gareth2 Avatar for Melanie2

This article is not intended to form legal or investment advice. Investments in property are not guaranteed and can decrease in value as well as increase.

New rules for landlords and tenants in Scotland after introduction of private residential tenancies
Law & Regulation
5 December 2017

Private Residential Tenancy: Scotland’s Strict New Grounds for Eviction

Guide to Section 21 Evictions for Landlords by law expert
Law & Regulation
2 August 2017

Section 21: Eviction, Possession & Notice to Quit