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.
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.
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