How will changes to Section 21 affect Bournemouth landlords?

A row of houses

The UK Government recently announced a major shake-up to the eviction process in a bid to prevent private landlords from evicting tenants from their homes at short notice and without good reason.

Described as ‘the biggest change to the private rental sector for a generation’, the plans include a consultation on new legislation to abolish Section 21 evictions as part of a complete overhaul of the sector.

Proposed changes to Section 21

Section 21 evictions can currently be used by landlords to regain possession outside the fixed term of a tenancy, giving two months’ notice to a tenant that they will seek possession. They are commonly used as a ‘backstop’ to Section 8 evictions.

The announcement about Section 21 has sent shock waves through the private rented sector, with reactions ranging from a pragmatic view that it will make the sector more transparent to some landlords calling it the ‘final nail in the coffin’ and announcing they will sell up.

The abolishment of Section 21 forms part of the overall discussion in Government about longer term tenancies becoming the mandatory offering to a tenant, allowing them a greater sense of security and flexibility.

The Government proposals as currently understood are as follows:

  1. To improve security for tenants by repealing Section 21 of the Housing Act (1988), putting an end to ‘no-fault’ eviction. This will protect tenants from having to make frequent and short notice moves and will enable them to plan for the future
  2. To amend the Section 8 eviction process, so landlords are able to regain their property should they wish to sell it or move into it themselves. This will provide a more secure legal framework and a more stable rental market for landlords to remain and invest in.
  3. To reform the court process for housing cases, so that landlords are able to swiftly and smoothly regain their property where they have a legitimate reason – meaning landlords have the security of knowing disputes will be resolved more quickly.

The Government has also announced that there will be a substantial consultation period before the new legislation comes into force, to ensure that they cover all the complexities of dealing with rewriting over 20 years of legislation in which the Section 21 notice plays a part.

So let’s have a look at each of the proposals in turn, and the potential pitfalls and remedies available to the Government.

1. The end of Section 21 notices

The introduction of the Section 21 notice in the Housing Act 1988 (amended by the Housing Act 1996) was the main driver behind the rapid growth of the private rented sector through the noughties. Removing the ability of a landlord to end a tenancy without a breach of the tenancy will create uncertainty, especially around those who provide the funds for landlords to finance their investment.

Whenever you create uncertainty, you also create the potential risk of money being pulled out of the private rented sector in its tens of millions. Interestingly, in recently published statistics, it was identified that only around 11% of tenancies were ended by the landlord serving notice.

2. Amending the Section 8 notice

If you abolish the Section 21, then as a landlord you are only left with the antiquated Section 8 notice in gaining possession of a property, and this currently only applies where a tenant has breached the terms of a tenancy. There are currently 17 grounds for possession available to a landlord, some of which are utilised more than other, with grounds 8, 10 and 11 (rent arrears) being the most common.

The proposals to include two new grounds – (a) one for a landlord who needs to sell and (b) a landlord who needs to move back in – will be interesting in terms of the evidence required to convince a judge that such a reason is appropriate for making an order for possession. What does selling a house mean? Will instructing an agent to market the property *for sale* be sufficient e to invoke the ability to serve a Section 8 notice?

This will be hugely dependant on how the legislation is written and interpreted by a judge, so undoubtedly a number of test cases will be required before the industry is fully aware of how it will work in practice.

3. Reforming the court process

The majority of complaints about the current Section 8 process relate to the length of time it can take to get possession, which can be anywhere from two months to six months depending on the location of the court and how awkward the tenants wishes to be. Reforming the court process, which may include the introduction of a specialist Housing Court, is to be applauded – but it will not happen overnight. It will also require substantial investment which ultimately will be paid by those looking to seek possession. The current court fee for a Section 8 notice is £325 and it would be no surprise if this were to increase significantly if a specialist Housing Court were to be introduced.

In addition to the court, another fly in the ointment of a speedy possession process is the use of a county court bailiff, which can add significant time. In London, applying for a bailiff warrant and the execution can be anywhere in excess of three months. This sometimes means the whole eviction process from serving notice on a tenant to actually getting vacant possession could almost be a whole year! Without increasing the number of county court bailiffs, and ultimately the cost burden to the landlord, then such changes will not work.

Summary

The abolishment of Section 21 and the shake up of the court system will be the biggest change in the last 20 years to the private rented sector, even eclipsing the recently introduced tenant fee ban. Without significant understanding of the landlord market, and the importance to a landlord of retaining a possession route without tenant blame, we could end up with changes that only consolidate the view of some private landlords that the Government is encouraging them to leave the market.

The proposed consultation period will be a chance for all stakeholders to submit their suggestions to the Government on how such a change can work for all involved. Considering the amount of work involved and the number of pieces of legislation that need to be amended, there is a possibility that the abolishment of the Section 21 will not be a reality until sometime in 2024.

If you’re concerned about the proposed changes to the private rental sector as a landlord, the property experts at Foxes are on-hand to help. With over 20 years’ experience in the local property market, we can work with you to ensure you protect your property investments. Contact us today at hello@foxes.co.uk, call us on 01202 299600 or find us online at www.foxes.co.uk

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